Goldman Sachs has outlined three distinct signals investors should watch as European companies prepare to report results in the coming weeks, warning that an elevated consensus could lead to more pronounced market reactions in the event of earnings disappointments.
In a statement summarising their focus for the period, the firm said:
"Going into the season, we will closely monitor: the extent to which the energy shock will transmit down the value chain; earnings developments for European names exposed to competition from China; management discussion on AI usage and on the related cost reductions,"
Reporting activity will be concentrated across July and August, with more than 90% of the STOXX 600 market capitalisation expected to have reported by the end of August. The last week of July is projected to be the busiest reporting window.
Consensus forecasts call for earnings growth of 11% year-on-year in the first half of 2026, a rise Goldman Sachs says is driven largely by commodity producers. When commodities are excluded, expected H1 2026 earnings growth falls to 6%.
Goldman Sachs reiterated its full-year outlook, continuing to expect STOXX 600 earnings to increase by 10% in 2026. Within that aggregate, commodity producers are forecast to see earnings expand by more than 50%.
Energy sector results have already been revised notably higher: energy earnings have been lifted by 28% since the start of the second quarter, a revision the broker attributes primarily to margin strength.
By contrast, outside the commodities complex, Goldman Sachs reports that aggregate earnings and margin expectations have remained broadly stable since the beginning of Q2. The firm links this stability to assumptions that the impact of the Iran conflict will be relatively short-lived but cautions that this expectation raises the threshold that companies must meet during the season.
The firm also highlights valuation developments. Expanding valuations beyond the energy sector - with banks and technology among the better performers in Q2 thanks to price-to-earnings re-rating - increase the chance of sharper market reactions to earnings misses, as investors will scrutinise longer-term growth prospects more closely.
On the macro front, Goldman Sachs characterises the environment as benign and supportive. Indicators cited include a resilient Current Activity Index and a small upward revision to area-wide Q2 GDP tracking estimates. Manufacturing PMI averaged 51.7 in Q2, up from 50.6 in Q1. The broker adds that a weaker EUR/USD in Q2 compared with Q1 should be a modest tailwind for companies with dollar or overseas revenues.
Turning to oil and gas specifically, the analysts expect strong Brent price realisations but say investors are likely to shift attention toward capital expenditure plans. Unlike in 2022, Goldman Sachs suggests that higher profits are unlikely to translate into materially larger shareholder returns this time, because reinvestment is expected to increase from structurally low levels.
Overall, the note frames the upcoming reporting season as one in which commodities will be the primary source of earnings upside, while rising valuations and a benign macro backdrop raise expectations and the potential for more volatile market responses to any disappointments.