European blue-chip companies are forecast to record only modest profit gains for the first quarter, with the headline improvement heavily concentrated in the energy sector.
Data from LSEG I/B/E/S show companies on the STOXX 600 are expected to post average earnings growth of 2.8% for the quarter. That aggregate rate masks a sharp divergence: when energy firms are removed from the calculation, expected earnings growth drops to just 0.3%.
Revenues for non-energy members of the blue-chip index are seen shrinking on average by 1.1% in the quarter, underscoring that top-line performance is lagging across much of the market.
The energy sector stands in contrast. Earnings for oil and gas majors are forecast to rise by 24.3%, reflecting the boost from higher crude prices following recent geopolitical events. Tajinder Dhillon, head of earnings research at LSEG, said this represents a marked reversal from the pre-war outlook: as of February 26, energy majors were expected to deliver 2.0% lower Q1 profits.
Crude futures have eased somewhat as prospects for peace gained traction, but they remain materially elevated compared with the levels before the strikes that drew the United States and Israel into conflict with Iran - still about 30% to 40% higher than those earlier benchmarks.
The latest earnings estimates also shifted sharply compared with forecasts issued last week. Analysts had been looking at 4.2% growth in earnings for the STOXX 600 only days earlier before the revisions reflected the changing oil price backdrop and other sector developments.
Not all sectors are benefiting. Real estate companies are expected to report earnings down by 13.7%, while utilities are seen delivering a 12.2% decline, according to the I/B/E/S report. These drops stand in contrast to the outsized contribution from energy firms.
One recurring pattern in recent quarters is that revenues have tended to underperform earnings. In seven of the last eight quarters, revenue growth has lagged or fallen more than earnings, which may suggest that cost reductions and business restructuring efforts are supporting profit margins even as sales slow.
Market participants note that the immediate impact of the war on first-quarter earnings could be limited, given the timing, but vigilance remains. Some investors warned that the outlook for 2026 could disappoint when full-year forecasts are updated during this earnings season.
Implications at a glance - The headline earnings improvement for Europe’s blue chips is concentrated in energy, while non-energy sectors face weak revenue trends and several sectors record double-digit profit declines. Cost cutting has helped sustain margins, but expectations for next year carry downside risk.