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The sharp strengthening of the euro seen to this point in 2025 may start to weigh on European company income, with the influence prone to floor because the second-quarter earnings season will get underway.
Based on a latest evaluation by Financial institution of America, a firmer euro — alongside softening gross sales — might depress earnings for the STOXX 600 index, probably marking the weakest efficiency in 5 quarters.
The euro-dollar alternate price has risen by 9% during the last quarter, reaching a four-year excessive and marking the strongest quarterly efficiency since late 2022.
In the meantime, the worth of the euro in opposition to a basket of foreign currency echange, tracked by the ECB, rose by 4.6% within the final quarter, reaching its highest degree on document on 1 July.
Because the second-quarter earnings season begins in Europe, the analyst consensus from Wall Road factors to a 3% decline in earnings per share (EPS) in comparison with the identical interval final yr.
That drop, underpinned by a 3% contraction in gross sales, displays each faltering demand and adversarial overseas alternate dynamics.
Power and shopper discretionary sectors (industries that promote non-essential items) are anticipated to be the most important drags on index earnings, greater than offsetting continued resilience from healthcare.
After two quarters of constructive development, earnings from cyclical sectors excluding financials are projected to return to contraction, with EPS forecasts lower by 2.5% previously month alone.
“Q2 earnings development for cyclicals (ex-financials) is predicted to show unfavorable once more after two quarters of constructive development,” stated Andreas Bruckner, fairness strategist at Financial institution of America.
“Optimistic euro space macro surprises suggest strong EPS beats, however euro energy is a danger,” he added.
Whereas financials had supported earnings in prior quarters, their contribution is predicted to be muted this time. Eurozone macroeconomic surprises had been barely constructive within the second quarter, sometimes an indication of respectable earnings efficiency to return.
Analysts have already slashed European earnings forecasts for 2025, citing forex appreciation and growing commerce limitations as key dangers.
Since early April, consensus EPS development expectations for each 2025 and 2026 have been lower by round 5%, with 17 of 20 main sectors seeing downgrades — autos being the toughest hit.
Expectations for 2025 EPS development have halved, from 6% to three%, and the 12-month ahead EPS for the STOXX 600 now sits 3% beneath its all-time excessive recorded in March.
Financial institution of America forecasts a 4% year-on-year decline in 2025 EPS, as world commerce headwinds, tariff results and slowing funding within the US weigh on European exporters and multinationals.
Three key earnings studies to observe
Almost two thirds of European corporates are on account of report earnings by the top of July.
Amongst them, three bellwether firms are prone to dictate a lot of the market’s tone for the quarter:
ASML Holding N.V. will report on 16 July. Europe’s largest semiconductor agency, with a market capitalisation of round €264 billion, is predicted to submit a 32% rise in EPS to €5.30, with revenues forecast at €7.61 billion, up 23% year-on-year. Traders will scrutinise outcomes for proof that AI-related demand continues to defend the corporate from broader geopolitical and commerce pressures. Regardless of the AI tailwind, ASML shares have remained flat in 2025.
SAP SE, Europe’s largest listed firm with a €308 billion market cap, studies on 22 July. Analysts forecast EPS of €1.46, up from €1.10 a yr in the past, with revenues anticipated to climb to €9.15 billion from €8.29 billion. Shares within the software program large are up round 11.5% to this point this yr, buoyed by investor optimism round digital transformation and cloud adoption.
UniCredit SpA would be the first main eurozone financial institution to report second-quarter outcomes, additionally on 22 July. Markets might be centered on how banks are navigating the ECB’s rate-cutting cycle. With the central financial institution having lowered the deposit facility price to 2% in June, analysts count on UniCredit’s EPS to dip by 3.5% year-over-year to €1.55, with income down 3% to €6.16 billion. Shares of UniCredit have surged 56% year-to-date, matching their whole 2024 achieve in simply over six months.