UBS has revised upward its earnings-growth outlook for Eurozone equities in 2026, lifting the expected increase to around 15%. That marks a sizeable rise from its earlier forecasts of 8% for the EuroStoxx 50 and 11% for broader Eurozone indices, according to the bank's updated projections. UBS kept its 2027 earnings-growth forecast unchanged at 15%.
After most companies had reported second-quarter results, UBS noted that reported earnings were running about 22% higher year on year. Excluding energy firms, the bank said earnings growth was roughly 11%, compared with 12% growth recorded in the first quarter.
Cost discipline remained an important factor supporting margins, UBS said, but it expects revenue growth to play an increasing role as several headwinds ease. Specifically, the bank pointed to improving manufacturing conditions, a reduction in currency-related pressures and stronger operating leverage as elements that should help revenues and profits recover further.
UBS described the improvement as broad-based across sectors and said it anticipated profit growth in every sector this year. The broker highlighted a pickup in financials, where loan demand and capital markets activity were improving. Industrial companies, it added, were benefiting from investment in areas such as AI, electrification and defence, as well as from better cyclical trends in automation.
Following a recent correction, UBS upgraded European information technology to an Attractive rating. The bank stated that valuations in the sector were no longer stretched and that renewed earnings momentum, together with rising expectations for AI-related semiconductor capital spending, provided support for the upgrade.
UBS also pointed to a strengthening breadth of analysts' earnings revisions, which it said had reached the highest level in three years. In addition, the bank noted that global manufacturing purchasing managers' indices had recovered into the low- to mid-50s - levels that historically have typically coincided with the end of downgrade cycles.
Overall, UBS maintained an attractive stance on European equities, particularly those in the Eurozone. The bank listed its sector preferences as banks, industrials, consumer discretionary, health care and information technology, and it singled out Germany as a favored market, noting that Germany's fiscal support offered an additional tailwind.
In terms of index targets, UBS's central scenario projects the EuroStoxx 50 at 6,900 in December 2026 and 7,100 in June 2027. Its upside scenario sets a June 2027 target of 7,600, while the downside scenario places a June 2027 level at 4,700.
Note: This report summarizes UBS's updated earnings forecasts, sector views and index scenario targets as presented in the bank's recent outlook.