European Corporate Q3 Earnings Growth Matches U.S. for the First Time in Three Years
nashnova research
Analysts expect MSCI Europe constituents to post 23% year-on-year profit growth in Q3 — just one point behind the S&P 500's 24% and the closest the two have been in over three years; cheap valuations plus improving momentum are forcing a second look at Europe.
First time in three years — what changed?
Bloomberg data show Europe's expected Q3 earnings growth at 23%, versus 24% for the S&P 500 — a gap of just one percentage point.
The last time European earnings growth topped the US was Q1 2023.
This means → Europe is no longer just "cheap." Earnings themselves are catching up, and that is the precondition for capital to rotate back.
What makes European equities attractive right now?
The Stoxx 600 trades at roughly 14× forward earnings, near its long-term average and at a ~25% discount to the S&P 500 since June.
Tech accounts for only about 9% of the Stoxx 600, versus roughly 38% in the S&P 500.
In plain terms = with far less tech weight, Europe takes a smaller hit whenever the market questions whether AI demand can last.
Leverage Shares analyst Violeta Todorova sums it up: Europe offers moderate valuations, improving earnings momentum, and low concentration in mega-cap tech.
Which companies have already delivered?
ASM International — the Dutch chip-equipment maker — rose about 4% after issuing an upbeat sales forecast.
Deutsche Bank beat expectations and gained roughly 4%; EssilorLuxottica surged about 16% on a strong report.
Consumer names were mixed: Unilever slipped about 2%, Volkswagen swung to a loss, and Kering and Hermès both fell after their results.
Are analysts raising or cutting forecasts?
A Citi index shows that over the past six months, more analysts raised European earnings estimates than cut them — the longest positive-revision streak since 2022.
In the US, earnings expectations have started to slip after a sustained upward run from mid-April.
This means → the revision trend is crossing over — Europe up, the US flattening — an early signal that relative attractiveness is shifting.
What is the real test from here?
Todorova says the key is whether earnings growth can spread from energy into industrials, banks, consumer, and tech.
In plain terms = if only energy is earning, and other sectors lag, "matching the US" stays a one-off.
BlackRock EMEA equity strategist Rob Powell sees near-term volatility — especially ahead of US midterms — but calls the long-term earnings outlook solid.
RootBridge Capital's Alpesh Patel names three conditions for investors to stay: improving return on capital, stronger cash generation, and continued upward earnings revisions — whether earnings breadth materializes by 2027 will be the ultimate test.
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