Graph of the Week – European earnings growth is expected to rebound sharply

Earnings growth rates for European equities have suffered in the year to date from low oil prices and the impact of the US administration’s tariffs on imports into the country. Analysts now expect earnings growth to rebound sharply over 2026 and 2027.

The consensus forecast is for earnings growth of the MSCI Europe index to exceed that of the US Russell 1000 Value index next year and approach it in 2027. The comparison with this US index is pertinent: the two market gauges have a similar composition.

The big difference between stocks in the MSCI Europe and those in the US index is valuations. The forward price-earnings ratio for the Russell index is 27% above its long-run average, while for the MSCI Europe index, it is just 3% above. 

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