Daily Management Review

Europe Inc.'s 2023 Profit Growth Prediction Raised By Goldman Sachs To 3%


Europe Inc.'s 2023 Profit Growth Prediction Raised By Goldman Sachs To 3%
On the back of increased oil prices, Goldman Sachs stated on Tuesday that it anticipates earnings for companies in the pan-European STOXX 600 index to climb by 3% in 2023 as opposed to its previous prediction of no growth.
Benchmark Since the Middle East war erupted earlier this month, Brent crude futures have increased 6% and currently trade at about $89 per barrel. The brokerage's analysts predict that Brent will end the year at $88 a barrel.
According to Goldman Sachs, rising oil prices would result in increased revenues, which will benefit industries associated to commodities. For these industries, the brokerage's analysts anticipate improving earnings.
Since the battle started, shares of the three major European oil companies, BP, Shell, and TotalEnergies, have increased by 4% to 7%.
On Monday, the oil and gas industry in Europe reached nine-year highs and increased by about 7% since October 6. The industry has increased 8.3% so far this year, above the STOXX 600's 6% growth during that time.
However, Goldman Sachs anticipates a 2% decline in European earnings this year after accounting for inflation. Profits are also threatened by growing debt costs brought on by rising bond yields, it claimed.
"We estimate that a 100-basis-point rise in the cost of debt would knock 3 percentage points off (STOXX 600's) EPS (earnings per share)," said Lilia Peytavin, portfolio strategist at Goldman Sachs.
On the assumption that oil prices will reach $100 per barrel by the end of 2024, Goldman Sachs anticipates earnings growth of 7% for the upcoming year as opposed to the 5% forecasted previously.
Goldman anticipates that between now and 2025, profits for American and European businesses will increase by 5% yearly, but only by 2% in real terms for Europe.