Our Privacy Statment & Cookie Policy

All LSEG websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.

October 11, 2022

STOXX 600 22Q3 Earnings Preview: Expectations Rise Heading into Earnings Season

by Tajinder Dhillon.

Earnings season kicks off next week and will provide further insight to myriad questions – will companies continue to report beats and surprises to the upside? Can companies continue to maintain record-high margins? Will forward earnings estimates start to reflect the economic reality of higher interest rates and a potential recession?

22Q3 earnings are forecasted at €131.3 billion (+29.4% y/y, -10.3% q/q) while revenue is forecasted at €1,431.4 billion (+18.2% y/y, -1.0% q/q).  Furthermore, analysts have upgraded both earnings and revenue growth expectations heading into earnings season.

Earnings growth has increased by 5.2 percentage points (ppt) heading into earnings season. This compares to a long-term average decline of 0.6 ppt and a median increase of 1.0 ppt.  The increase in heading into earnings season marks the seventh consecutive quarter where growth expectations have increased into earnings season.

Like the past few quarters, the lion share of earnings growth is expected to come from the Energy sector with a current forecast of €34.0 billion (+142.7% y/y, -6.2% q/q).  From an earnings contribution perspective, the energy sector is currently forecasted to contribute 19.7 ppt towards the index growth rate of 29.4%.  Said differently, the energy sector is expected to contribute 67% of the total earnings growth this quarter.

Industrials (3.1 ppt) and Utilities (2.7 ppt) are the next largest contributors while Basic Materials (-2.0 ppt) and Real Estate (0.0 ppt) are the largest detractors to earnings growth this quarter.

Exhibit 1: STOXX 600 22Q3 Earnings Contribution

Which companies have seen the largest revisions heading into earnings season?

Using the Screener app in Refinitiv Workspace, we can screen for yet-to-report constituents that have seen the largest upgrades and downgrades heading into earnings season.

Exhibit 2 highlights companies who have seen earnings downgrades of at least 10% as defined by the 30-day mean estimate change in ‘Preferred Earnings’. In addition, we also include a criterion where the SmartEstimate (explained below) compared to the Mean Estimate is either a) greater than or equal to €0.02 cents, or b) less than or equal to €-0.02 cents.

Zalando SE has seen the largest downgrade in EPS estimates over the last 30 days (-75.0%) followed by Thule Group AB (-51.3%), Akzo Nobel NV (-30.5%), ArcelorMittal SA (-26.7%), and Norsk Hydro ASA (-22.2%).

Exhibit 2: Negative Revision for 22Q3

Source: Refinitiv Workspace

Exhibit 2 also displays the Predicted Surprise (PS) for each constituent, which compares the SmartEstimate vs. Mean Estimate.  A PS greater than 2% or less than -2% is deemed significant as our research shows that StarMine will accurately predict the direction of the earnings surprise 70% of the time.

The StarMine SmartEstimate is a quantitative analytic which is used as an input to many of the StarMine models.  The SmartEstimate places a greater weight on higher ranked analysts who are more accurate and timelier.

We see a positive correlation between constituents who have seen a large downgrade and a corresponding negative PS.  Furthermore, a positive correlation is shown between the mean estimate change vs. Analyst Revision Model (ARM) score (i.e., companies that have seen large downward earnings revision also have a low ARM score).

ARM is a percentile stock ranking model that is designed to predict future changes in analyst sentiment by looking at changes in estimates across EPS, EBITDA, Revenue, and Recommendations over multiple time periods.

The last two columns in Exhibit 2 display both the current ARM score and its 30-day change.  For example, Norsk Hyrdo ASA has an ARM score of 11 (ranked vs. regional peers) and its ARM score has declined by 22 over the last 30 days.

Looking at the Predicted Surprise and ARM columns can be very useful during earnings season to assess the likelihood of whether companies are expected to beat or miss earnings while at the same time gauging analyst sentiment.

Exhibit 3 displays the same data for constituents with the largest upgrades heading into earnings season.

Exhibit 3: Positive Revisions for 22Q3

Source: Refinitiv Workspace

Net profit margins at a record-high

The forward 12-month net profit margin for the STOXX 600 is currently at an all-time high of 10.1% according to Refinitiv Datastream and has increased by 230 basis points (bps) over the last two years as shown in Exhibit 4.  Every sector except for Health Care and Consumer Staples has seen a rise in profit margin over this period with the largest gains seen from Energy (+620 bps), Financials (+430 bps), and Consumer Discretionary (+320 bps).

Certainly, this will be of critical importance as investors look to see if companies are still able to produce record level of margins in the face of higher inflation, wages, and commodity prices and whether companies are still able to pass on these costs to consumers.

Exhibit 4: STOXX 600 Net Profit Margin

If companies highlight margin pressure this quarter, we expect margin expectations to further decline and filter through into the bottom-up EPS estimate for the index.  As per Refinitiv Datastream, forward 12-month EPS estimates have increased year-to-date (+15.6%) to $36.9 per share while the STOXX 600 has declined 17.4% over the same period (-28.9% in USD), leading to one of the largest gaps between ‘P’ vs. ‘E’ in recent years (Exhibit 5).

More striking is the trajectory in the forward 12-month EPS ex. Energy estimates ($15.2 per share), which has declined 24.4% since February.

Exhibit 5: STOXX 600 Forward P/E Decomposition


Markets are looking to companies to provide commentary on several issues from the macro-outlook, energy prices, health of the consumer, supply chain management, impact of inflation and higher input costs, hiring plans, and the strength of the U.S. dollar which will actually provide a tailwind for companies with international revenue exposure.

Given the host of worries noted above, we may see an increase in companies either a) withdrawing forward guidance, or b) lowering forward guidance which will bring further downward revisions to earnings and revenue estimates.


Refinitiv Workspace is a complete solution for research and analytics. It places the most comprehensive market information, news, analytics and trading tools available into a desktop.

Refinitiv I/B/E/S Estimates are a market leader, boasting 200+ metrics and indicators across 15 industries. Find more information on our estimates data.

Get unique value-add analytics and predictive financial modeling, dedicated to making investment research smarter with Refinitiv StarMine data.

Article Topics

Get In Touch


We have updated our Privacy Statement. Before you continue, please read our new Privacy Statement and familiarize yourself with the terms.x