Deutsche Bank Predicts Solid Earnings Growth for European Companies

Introduction

In a fresh research update, Deutsche Bank predicts solid earnings growth for European corporations, even as consensus leans cautious. The bank sees the third quarter showing low single-digit gains and expects 10–12% earnings growth in 2026, underlining its bullish tilt on European equities despite macro headwinds.

Near-Term Earnings Outlook

While many estimates suggest a decline in Q3 year-on-year earnings for the STOXX 600, Deutsche Bank sees a different path: modest growth rather than contraction. The bank cites a strengthening European macro environment, rising PMIs, easing worries about trade tariffs, and improving business sentiment, as factors that may lift corporate performance.

At the same time, the U.S. continues to exceed growth expectations, though a weakening U.S. dollar is tempering the benefits for European companies with dollar-denominated revenues.

Looking Ahead: 2026 Earnings Upside

Deutsche Bank is more aggressive in its medium-term view. It expects earnings growth of 10–12% for European equities in 2026. This view stands in contrast to more conservative consensus views, reflecting the bank’s conviction in macro stabilization, policy support, and valuation re-rating.

Furthermore, the bank sees upside potential of 12–16% for major European indices heading into 2026, driven by double-digit profits, fiscal stimulus (especially from Germany), and undervalued equity markets.

Strengths, Risks & Key Drivers

Strengths Underpinning the Forecast

• Valuation tailwinds: European equities are trading near historical norms, offering room for multiple expansion.
• Fiscal stimulus: Germany’s budget and policy moves may provide lift, especially in industrial and manufacturing sectors.
• Growing optimism: With some trade concerns cooling and macro indicators improving, sentiment could reaccelerate upward revisions.

Risks to Watch

• Sluggish sectoral recovery: Some industries, like materials or energy, have lagged and may struggle even in a broader rebound.
• External shocks: Geopolitical tensions, trade policy reversals, or currency volatility could derail the trajectory.
• Execution & guidance risk: Even with macro tailwinds, individual companies may miss estimates or guide lower, especially those with stretched balance sheets.

What to Monitor Next

• Q3 earnings reporting season: Watch for actual results vs. consensus, especially in banking, industrials, and consumer sectors.
• Earnings revisions trend: Upward earnings revisions could validate Deutsche Bank’s more sanguine forecast.
• Policy signals in Europe: Especially German fiscal moves, EU stimulus, or regulatory reforms that could shift corporate prospects.
• Index performance & flows: Capital rotation into Europe from the U.S. or emerging markets could support multiple expansion.

Conclusion

Deutsche Bank predicts solid earnings growth for European corporate players, projecting modest gains in Q3 and a stronger 10–12% earnings growth in 2026. While challenges remain, the bank’s outlook leans bullish, betting on a convergence of macro upswing, policy support, and valuation catch-up. If Europe can prove resilient, this may be the foundation for renewed equity momentum across the region.