Investing.com -- The bulk of European companies have now reported their latest earnings, with the region demonstrating solid momentum, according to Morgan Stanley (NYSE:MS) strategists.
Specifically, approximately 75% of Europe’s market capitalization, which includes 66% of MSCI Europe companies, has reported earnings, revealing a net 18% of companies surpassing earnings expectations and 52% outperforming on sales.
The earnings and sales figures reported have exceeded consensus estimates by 3.6% and 2.4%, respectively, marking a slight decrease from the previous figures of 3.8% and 2.8%.
“Thus far, there remains a strong skew to sales beats, with net beat ratios for sales and earnings coming down slightly to 52% and 18%, respectively,” strategists led by Matthew Nguyen said in a note.
The sectors contributing to the robust performance include Aerospace & Defense (A&D), Construction & Materials, Transportation, Banks, and Technology Hardware, with high proportions of earnings per share (EPS) beats also observed in Construction & Materials, Semiconductors, Software (ETR:SOWGn), Real Estate, Pharmaceuticals, and Banks.
Morgan Stanley has pointed out a skew to beats and positive earnings revisions in sectors such as Transportation, Construction & Materials, Banks, A&D, Capital Goods, and Diversified Financials.
The Wall Street firm also highlighted noteworthy management sentiment shifts, as companies showing significant quarter-over-quarter improvements often outperform those with declining sentiment.
Using AlphaSense’s Language Learning Model (LLM), they have identified stocks with strong positive changes in management sentiment, including BAE Systems (LON:BAES), Leonardo SpA (BIT:LDOF), Nordea Bank Abp (CSE:NDADK), Marks and Spencer Group PLC (LON:MKS), Siemens Energy AG (ETR:ENR1n), EssilorLuxottica SA (EPA:ESLX), Symrise AG Inh. O.N. (ETR:SY1G), and ASR Nederland NV (AS:ASRNL).
Looking ahead, with 25% of the market cap yet to report, Morgan Stanley’s analysts anticipate potential beats from companies like Rheinmetall (ETR:RHMG), International Consolidated Airlines Group S.A. (BME:ICAG), Reckitt Benckiser Group PLC (LON:RKT), and Amplifon (BIT:AMPF). However, there is an overall expectation for more misses than beats in the remaining earnings season.
The strategists also note that some stocks on their accruals factor screen have yet to report earnings. So far, 10 companies from the low accruals list—considered a positive earnings indicator—have exceeded expectations or raised guidance, while four have missed. Among stocks in the high accruals list, the ratio of misses and guidance cuts to beats stands at 7 to 6.