An acceleration in European economic growth should underpin a recovery inrevenues and profits despite a fourth-quarter earnings season that has beenmixed thus far, strategists at Barclays (LSE: BARC.L - news) say.
Although there has been about an equal number of negative earnings surprisesas there have been positive ones, with slightly more misses than beats on arevenue basis, Barclays believes that investors should "keep the faith" in aEuropean earnings recovery.
"With recent data confirming forecasts of acceleration in European economicgrowth in 2014, we think the consensus materially understates the scope for arecovery in both revenues and profits," strategists at Barclays write in a note,adding that earnings per share could expand at "twice the rate currentlyprojected by consensus."
Barclays retain an overweight stance on sectors such as financials,materials, industrials and consumer discretionary stocks, the prospects forwhich should improve the most as top-lines and bottom-line earnings pick-up.
The bank holds below-benchmark weightings in defensive sectors such asutilities, telecoms and consumer staples.
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