European Equity Strategy: European Reporting Season: Upgrades, Delivery and Dispersion

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European Equity Strategy: European Reporting Season: Upgrades, Delivery and Dispersion

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31 Jul 2026 10:52:58 ET │ 12 pages

European Equity Strategy

European Reporting Season: Upgrades, Delivery and Dispersion

CITI'S TAKE

Beata M Manthey, Ph.D. AC

While European 2Q26 earnings have largely met expectations, this follows +44-20-7986-4349

an unusually powerful pre-reporting upgrade cycle that had already raised beata.manthey@citi.com

the bar for positive surprises. More importantly, the market response has

been highly discerning: Companies delivering earnings have been rewarded, Nikhil N Jadhav, CFA AC

while misses have faced significant penalties. Encouragingly, earnings +44-20-7508-0895

momentum remains positive and increasingly broad-based, with both 2Q nikhil.nitin.jadhav@citi.com

and 3Q growth expectations moving higher and a wider set of sectors

contributing to the recovery. Together with the strong breadth of recent David Groman AC

earnings upgrades, which has historically been associated with further EPS +44-20-7986-4346

revisions and stronger equity returns, this reinforces our constructive view david.groman@citi.com

on European equities.

Average Reporting Season — European earnings season is tracking close to

historical norms, with 56% of companies beating EPS expectations and aggregate

earnings 3% ahead of forecasts, but the magnitude of surprises continues to lag the

US, where 88% of companies have beaten. However, this is entirely logical given that

pre-reporting revisions (ERI) had already been revised up significantly, raising the

hurdle for positive surprises.

Strong Price Reaction — Investors are increasingly rewarding earnings delivery, with

EPS beats generating an average +1.6% 1-day outperformance, up from +0.8% in

1Q26.