European Equity Strategy: Earnings Revisions: Uncommonly High, Unusually Broad, Unseasonally Strong

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European Equity Strategy: Earnings Revisions: Uncommonly High, Unusually Broad, Unseasonally Strong

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15 Jul 2026 13:01:54 ET │ 10 pages

European Equity Strategy

Earnings Revisions: Uncommonly High, Unusually Broad, Unseasonally

Strong

CITI'S TAKE

Recent improvements in our Europe ex-UK Earnings Revisions Index (ERI)

stand out on three fronts: magnitude, breadth, and timing. On

magnitude, the gauge recently reached its highest point in five years Beata M Manthey, Ph.D.AC

(+30%). These levels of ERI strength have historically been associated +44-20-7986-4349

with positive performance over 3–6m horizons, albeit not necessarily beata.manthey@citi.com

relative outperformance. On breadth, 80% of European sectors are in net David GromanAC

upgrade territory, a clear shift from very narrow upgrades (Commodities & +44-20-7986-4346

Tech) in the immediate aftermath of the US-Iran conflict. Relatedly, david.groman@citi.com

history suggests that ERI broadening at a global level tends to favor more

Cyclical markets like Europe. On timing, recent ERI strength bucks usual Nikhil N Jadhav, CFAAC

seasonal trends (i.e., weakness into reporting season, improvement after). +44-20-7508-0895

nikhil.nitin.jadhav@citi.com Historically, this setup has led to further earnings upgrades, improving

forward EPS expectations, and solid equity returns. While ERI could be

nearing its peak, these signals reinforce our constructive stance on

European equities.

Observation #1: Magnitude - Uncommonly High

We closely monitor developments in our proprietary Earnings Revision Indices

(ERI) for signs of improvement in corporate earnings. Following a wave of

downgrades at the onset of the Iran conflict, earnings revisions have been improving

globally.