European corporate outlook improves, but earnings forecast to fall

Core Viewpoint - The outlook for European corporate health has improved, with European blue-chip indices reaching highs due to a better-than-expected earnings season [1] Group 1: Earnings Forecasts - European companies are expected to report a 1.1% drop in fourth-quarter earnings for 2025, a significant improvement from the previously anticipated 3.1% decrease [1] - This projected decline would still represent the worst earnings performance in the past seven quarters [2] Group 2: Market Sentiment and Performance - Market forecasts for fourth-quarter earnings deteriorated significantly after the announcement of tariffs by U.S. President Donald Trump, with expectations for STOXX 600 company earnings dropping from around 11% growth to a contraction of up to 4.2% [3] - Recent weeks have seen a slight rebound in forecasts, with 60% of companies reporting better-than-expected results, compared to the typical 54% [4] Group 3: Revenue Outlook - The outlook for revenue has worsened, with STOXX 600 companies now expected to see revenues 3.4% lower than the same period last year, compared to a previous forecast of a 3.2% decrease [4] Group 4: Positive Contributors - Positive results from luxury group Hermes and EssilorLuxottica, along with optimistic guidance for 2026 from Anheuser-Busch Inbev and Siemens, have contributed to improved sentiment in Europe [5]