European equity offerings have experienced a significant downturn in the third quarter, with share sales volume declining approximately 20% year-on-year, according to data compiled by Bloomberg. September proved particularly challenging, reflecting a less-favorable market backdrop and hesitancy ahead of key central-bank decisions. The decline comes after a strong first half performance, when European bourses saw $89 billion of stock sales in the first six months of the year, representing a 36% increase compared to the previous year. As reported by Bloomberg, September was quieter than the previous year, reflecting a less-favorable market backdrop, hesitancy ahead of key central-bank decisions and a late Labor Day holiday, the traditional starting point of the autumn deals window.
European companies are expected to report robust third-quarter earnings growth, with companies listed on the benchmark STOXX 600 index forecast to post 21% year-on-year aggregate earnings growth, according to the latest LSEG I/B/E/S data. This represents an improvement from the 19.4% projected a week earlier and would mark the second-strongest quarterly profit growth in the past 14 quarters. Excluding the energy sector, earnings growth for STOXX 600 companies is expected to reach a more modest 9.7%, highlighting the significant contribution of energy producers to the overall outlook. Revenue growth is also expected to remain robust, with European blue-chip companies projected to report a 10.6% year-on-year increase in sales, above the average recorded over the past couple of years.
European energy companies are forecast to record exceptional earnings growth of 115.9% in the third quarter, according to LSEG data, benefiting from disruptions to global fossil fuel supplies linked to the US-Israeli war with Iran and Ukrainian drone attacks on Russian refineries. The attacks have sharply reduced exports from some of the world's largest fossil fuel producers, supporting the earnings outlook for European energy majors. The strength of the energy sector is expected to provide a substantial boost to overall European corporate profits, even as earnings growth across other industries remains more moderate. This contrasts sharply with the real estate sector, which is expected to report a 71.5% year-on-year decline in third-quarter earnings, making it one of the weakest performers in the earnings season.
The prospect of rising interest rates and inflation, combined with unrelenting geopolitical instability, has created a challenging outlook for the fourth quarter. As reported by Bloomberg, Ashish Jhajharia, head of equity capital markets for Europe, Middle East and Africa at JPMorgan Chase & Co, noted that while headline indices are near all-time highs and VIX is fairly benign, there are clearly concerns underneath the surface around rates, inflation, and geopolitics. Despite these challenges, some companies continue to pursue fundraising, with France's Schneider Electric SE announcing plans to raise up to €6 billion of fresh equity for its acquisition of industrial software firm PTC Inc. With the pipeline of European IPOs starting to thin, dealmakers will be counting on resilient stock prices and corporate earnings to maintain elevated levels of capital raising and investor demand.
Despite market challenges, corporate fundraising continues through various channels, with recent activity including the UK's Land Securities Group Plc, France's Rexel SA, and Belgium's Warehouses De Pauw raising a combined $1.7 billion through separate stock sales. As reported by Bloomberg, James Palmer, head of EMEA ECM at Bank of America Corp, expects investors to continue backing offerings from businesses with compelling fundamentals, including new listings, noting that higher interest rates are generally less supportive for equities, but resilient earnings provide an important counterweight. The momentum has slowed from the first half when European bourses saw $89 billion of stock sales, representing a 36% increase compared to the previous year. Investors will particularly focus on upcoming results from chip equipment maker ASML, Europe's most valuable listed company, and Swedish telecom equipment manufacturer Ericsson next week, which are expected to provide important signals about the health of the semiconductor and telecommunications industries.
