The Q2 earnings season saw a notable improvement in EPS growth across both Europe and the U.S., according to Barclays analysts.
The bank explained in a note Wednesday that EPS growth in Europe rose by 3%, while the U.S. experienced a more significant increase of 10%, both well above consensus estimates.
As the earnings season progressed, these blended growth numbers improved materially, reflecting a stronger-than-expected performance.
In the U.S., earnings beats improved compared to previous quarters, signaling a positive shift.
However, in Europe, while earnings beats were solid, they fell slightly below those seen in the prior quarter, according to Barclays.
Despite these decent earnings, markets reacted negatively, influenced by a more cautious tone from companies regarding their full-year outlooks.
This cautious sentiment overshadowed the resilient margins and strong capital returns reported by many firms.
Barclays notes that full-year earnings momentum initially turned lower as the results season began, primarily due to underperformance in cyclical sectors.
These sectors were identified as the primary laggards, dragging down Q2 beats and FY24 EPS momentum. However, Barclays highlights that this downward trend has stabilized recently, offering some optimism moving forward.
The bank says that Financials, in particular, stood out during the earnings season, with strong performances leading to upgrades that helped offset some of the negative revisions in other sectors.
Barclays also pointed out that the pullback in Tech and Semiconductor stocks seems "overdone" when compared to their earnings performance, suggesting potential opportunities in these areas.
While Q2 earnings showed robust growth, particularly in the U.S., the market's cautious outlook on future earnings dampened the positive momentum. Nonetheless, with stabilization in earnings momentum and opportunities in certain sectors, the overall outlook remains cautiously optimistic.