With earnings estimates trimmed and demand cooling, utilities and other sectors signal vulnerability ahead of Thursday’s release wave.

As companies across Europe prepare to unveil their third‑quarter results, investors and analysts alike are eyeing a noticeably darker tone. The latest consensus estimate for corporate earnings growth in Europe now stands at just +0.2 % year‑on‑year, down sharply from earlier expectations of around +0.5 %.

This modest figure marks a significant escalation of caution: at the start of the year some firms were forecasting double‑digit growth, but a mix of weak demand, margin pressure, and macro‑headwinds has gradually chipped away at optimism.

Downturn across sectors, with utilities especially under pressure
One striking feature of this outlook is the weakening forecast across multiple sectors—and particularly within the utilities space. Some forecasts suggest the utilities sector may see a contraction, reflecting both soft demand and rising input costs.

Meanwhile, sectors tied to consumer spending, industrial output and exports are showing signs of fatigue. Freight and logistics firms, for example, are facing falling rates and weak volumes, signalling a broader weakness in goods demand that will flow into corporate earnings.

What’s behind the slow‑growth scenario?
Several factors are driving down the outlook:

• Cooling demand in Europe and beyond. Growth in final‑demand categories is moderating, which squeezes revenues.
• Margin pressure rising. Even where revenues hold up, companies are facing higher costs—whether from energy, labour or supply‑chain disruptions—and this is eating into profit.
• Trade and export headwinds. With global trade dynamics uncertain, particularly for European exporters, the risk of lower external demand remains.
• Valuations lagging fundamentals. With earnings growth fading, investors are increasingly looking for signs of quality and sustainability rather than broad rebound stories.

Friday’s reporting window: what to watch
As the earnings season picks up pace heading into Thursday and beyond, market watchers will be scrutinising several items:

• Corporate commentary on margins and pricing power.
• Demand signals from cyclical sectors.
• Utilities and energy companies for divergence.
• Revisions to forward guidance.

Implications for investors and market sentiment
For investors, the muted earnings growth means that markets may rely more heavily on valuation adjustments and multiple expansions rather than earnings upside. That in turn raises the stakes for segments and companies showing genuine resilience or differentiation.

A weak earnings season could put further pressure on regions and sectors already trading at stretched valuations relative to growth prospects. On the flip side, companies that deliver despite the backdrop may stand out and attract premium re‐rating.

Conclusion
With the estimated +0.2 % earnings growth for Q3 in Europe signalling one of the weakest quarters in recent years, the message from the corporate sector appears to be: steady, but hardly strong. While the headline may not trigger alarm bells, the risk lies in the nuance — where many companies will struggle to grow profit meaningfully, and where markets may begin discounting a longer‑term reduction in momentum rather than a temporary lull.

In this context, the upcoming earnings disclosures around Thursday will matter not just for the figures themselves, but for the tone they set for the region’s corporate cycle. Investors will be watching closely for signs of durability — or further deterioration.