European Companies’ Second-Quarter Earnings Beat Perceptions, With Broad-Based 13% EPS Growth: Goldman Sachs
A Goldman Sachs research note says European companies’ first-half EPS rose about 13% year over year and still increased 7% excluding commodities.
A Goldman Sachs research note says European companies’ first-half EPS rose about 13% year over year and still increased 7% excluding commodities. The breadth of positive earnings revisions has widened, pushing sentiment to a three-year high.
The market reaction has also been stronger than usual, with some AI technology stocks an exception. Goldman Sachs said the European earnings recovery is healthy and broad-based rather than a narrow cycle driven only by commodities. That contrasts sharply with the market’s widespread perception that European earnings are weak.
The report’s framework is that broader earnings-revision breadth has lifted sentiment to a three-year high, creating scope for perceived pricing discrepancies to be corrected. It says the market remains overly pessimistic about European earnings, while the actual results have been significantly better than expected and the breadth of earnings outperformance has not yet been fully reflected in valuations.
As a potential market implication, the note points to fundamentally driven European equity exposure and refers to sector positive rating, neutral and cautious rating recommendations. It does not provide a specific portfolio allocation in the supplied text.
Goldman Sachs identifies three catalysts: the direction of earnings revisions during subsequent European reporting seasons; whether European macroeconomic data support the improvement in earnings; and whether earnings at AI technology companies can stabilize.
Bottom line: European second-quarter earnings were stronger than market perceptions, while first-half EPS rose 13% year over year on a broad-based foundation. The note says the market’s pessimistic pricing of European earnings may have room to recover.
The market reaction has also been stronger than usual, with some AI technology stocks an exception. Goldman Sachs said the European earnings recovery is healthy and broad-based rather than a narrow cycle driven only by commodities. That contrasts sharply with the market’s widespread perception that European earnings are weak.
The report’s framework is that broader earnings-revision breadth has lifted sentiment to a three-year high, creating scope for perceived pricing discrepancies to be corrected. It says the market remains overly pessimistic about European earnings, while the actual results have been significantly better than expected and the breadth of earnings outperformance has not yet been fully reflected in valuations.
As a potential market implication, the note points to fundamentally driven European equity exposure and refers to sector positive rating, neutral and cautious rating recommendations. It does not provide a specific portfolio allocation in the supplied text.
Goldman Sachs identifies three catalysts: the direction of earnings revisions during subsequent European reporting seasons; whether European macroeconomic data support the improvement in earnings; and whether earnings at AI technology companies can stabilize.
Bottom line: European second-quarter earnings were stronger than market perceptions, while first-half EPS rose 13% year over year on a broad-based foundation. The note says the market’s pessimistic pricing of European earnings may have room to recover.