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First-quarter earnings expected to have risen 1.9% year on

year

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60% of companies have beaten forecasts, versus 54%

typically

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Banks have performed well, but energy firms have struggled

By Samuel Indyk and Danilo Masoni

LONDON, May 15 (Reuters) - Europe Inc has weathered the

turbulence sparked by U.S. President Donald Trump's tariff

policies to deliver resilient first-quarter earnings, but in

spite of the newly-minted trade truce, investors still face a

fog of uncertainty.

According to LSEG I/B/E/S, first quarter earnings are

expected to have increased 1.9% from the same quarter a year

ago, marking the fourth straight quarter of growth. Excluding

the energy sector, earnings are expected to have risen 7.3%.

The impact of Trump's tariffs and macro-economic uncertainty

dominated corporate communications, while some companies warned

about the strong euro and its impact on revenue. Cyclical parts

of the market struggled, while bank earnings remained robust.

Here are five key takeaways:

UNCERTAINTY REIGNS

Trump's tariff plans cast a shadow over earnings and

companies mostly reacted by maintaining or pulling guidance,

even as business got off to a relatively strong start to the

year.

"The last time we had this kind of uncertainty around

guidance and companies pointing to a lack of visibility was Q1

in 2020 when COVID started," said Magesh Kumar Chandrasekaran,

equity strategist at Barclays.

"This has been the most unclear, or uncertain, earnings

season from a guidance standpoint."

Despite the relatively upbeat first quarter - where 60% of

companies have beaten estimates, compared to a usual quarter of

about 54% - consensus estimates for the full year have still

been cut aggressively over the last two months.

"It's going to be difficult to project first quarter

earnings further down the year because so much has happened

since the end of the quarter," said Kevin Thozet, member of the

investment committee at Carmignac.

MISSES PUNISHED BY MOST IN A DECADE

As has been the case in recent quarters, earnings misses

have been heavily penalised by the market, in part because

expectations had been downgraded heading into reporting season.

According to Goldman Sachs, the average relative price

reaction for companies reporting below expectations has been a

2% drop, the most severe of the last 10 years. Rewards for

earnings beats remain in line with the historical average.

"There was probably expectation that some of the numbers in

Q1 would have the benefit of front-loading and companies pulling

activity forward because they were unsure what was going to

happen in Q2," said Maarten Geerdink, head of the European

equities team in fundamental equity at Goldman Sachs Asset

Management.

"So even though earnings expectations had dripped down, the

market still believed they could beat these numbers. That's

weighed pretty heavily on these misses."

EURO RALLY ADDS TO HEADWINDS

Not only were corporates worried about tariffs, but they

sounded the alarm over the unexpected strength of the euro, as

investors shunned dollar assets after Trump's tariff blitz.

The single currency has surged about 10% against the dollar

since its February trough, and although it has pulled back

slightly since the U.S./China tariff pause, it remains elevated.

This is a problem, given about 60% of revenues for companies

on Europe's STOXX 600 index are generated abroad.

"It's an issue for exporters. When you have tariffs and a

stronger currency on top of that it becomes a double whammy,"

said Barclays' Chandrasekaran.

"The sharp cuts (to earnings expectations) have come for the

export-oriented part of the market," he added.

Companies that flagged currency movements as a potential

headwind in the year ahead included Europe's largest company SAP

, Munich Re, Bayer, Prysmian

, Unilever ( UL ) and L'Oreal.

BANKS UNFAZED

Bank earnings have largely weathered the market volatility

around U.S. tariffs. Many lenders beat expectations and stuck to

their 2025 forecasts - a clear departure from prevailing

corporate caution.

Even with pressures from moderating interest rates, their

latest updates showed resilience in the face of global trade and

macro uncertainties. UBS estimates nearly 90% of banks beat

market consensus, largely driven by strong revenue performances.

The sector trades cheaply based on various metrics, and even

after a 28% surge this year, it remains in favour among

investors attracted by high payouts and stronger balance sheets.

According to BofA's European fund manager survey, banks

reclaimed their spot as the most overweighted sector this month,

with financial stocks expected to be the best performers this

year.

"Bank numbers are all very strong," said Carlo Franchini,

head of institutional clients at Banca Ifigest.

ENERGY EARNINGS DRAG

Seven of the 10 major sectors tracked by LSEG I/B/E/S have

seen growth in earnings relative to the first quarter of 2024,

but energy is not one of them, with the sector expected to

report earnings down 28% from the same period a year ago.

"There's a very clear correlation between profitability and

the oil price, and the oil price has come off," GSAM's Geerdink

said.

"It's a function of two things, lower economic activity and

OPEC producing much more than anticipated."

Oil prices tumbled to a four-year low last month on concerns

about demand following Trump's tariffs, but have since rebounded

slightly as trade tensions thawed.