Constructive into Earnings, Target Up

Research evidence excerpt

Constructive into Earnings, Target Up

Idea

July 10, 2026 01:39 AM GMT

Morgan Stanley & Co. International plc+MEuropean Equity Strategy | Europe Marina Zavolock

Equity Strategist

Constructive into Earnings, Marina.Zavolock@morganstanley.comRegiane Yamanari +44 20 7425-2318

Regiane.Yamanari@morganstanley.com +44 20 7677-4652

Target Up Leoni Externest, CFA

Leoni.Externest@morganstanley.com +44 20 7425-2681

European earnings revisions breadth & ex Energy margins are Emily A Woods

trending sharply higher. Our bottom-up analysts are more EquityEmily.Woods@morganstanley.comStrategist +44 20 7425-1597

constructive into earnings than they have been in years. Our top- Morgan Stanley India Company Private Limited+

down feedback suggests European earnings are misunderstood Jitiksha Shah

& underappreciated, benefiting from inflation, AI, & global EquityJitiksha.Shah@morganstanley.comStrategist +91 22 6995-9374

diversification. We edge up our EPS growth & target multiple Karthik Nityanand

forecasts. +10% MSCI Europe upside to June '27. StrategistKarthik.Nityanand@morganstanley.com +91 22 6995-1587

The case for European earnings - misunderstood & underappreciated: We have

Exhibit 1 : Europe's earnings revisions

been making the case that European equities benefit in inflationary environments,

breadth is moving sharply higher...

regardless of lackluster Euro Area GDP growth. Why? 1) 59% of the MSCI Europe

Earnings Revisions Breadth (FY2, 75D rolling)

earnings pie is made up of real assets + banks + compute = areas which tend to see 30% MSCI Europe MSCI US MSCI EM TOPIX

earnings upgrades in inflationary, post geopolitical escalation environments. 2022 20%

saw 18.5% earnings growth. Consensus for this year has risen to 16.9% ( Exhibit 3 ). 10%

0%