UBS Identifies Top European Stocks to Watch Amid Cautious Q2 Earnings Outlook

UBS strategists predict modest growth and mixed results across sectors during the second-quarter European earnings season. Companies with improving earnings outlooks and high short interest, such as Antofagasta and Poste Italiane, may surprise positively. Others, like Anglo American, may face downside risks. Firms whose first-quarter EBIT figures were significantly ahead or behind expectations may upgrade or downgrade their full-year guidance. UBS remains cautious on 2025 but anticipates a rebound in 2026.

UBS strategists have outlined their expectations for the upcoming second-quarter European earnings season, anticipating modest growth and mixed results across various sectors. According to UBS, the season is likely to be shaped by modest expectations and sector divergence, with zero overall growth forecast for the period [2].

The UBS team sees considerable downgrades in tariff and currency-sensitive industries, including autos, transport, tech hardware, luxury, and food and beverage. Despite this, select names could surprise the market on the upside. UBS highlights companies like Antofagasta (LON:ANTO) and Poste Italiane SpA (BIT:PST) as names that could see a Q2 surprise, given their improving earnings revisions and high short interest [2].

Conversely, companies like Anglo American PLC (LON:AAL) are flagged for potential downside risk due to deteriorating revisions and a crowded long position [2]. Firms whose first-quarter EBIT figures were significantly ahead or behind expectations may upgrade or downgrade their full-year guidance. UBS notes that companies like Boliden (ST:BOL) and Adidas (OTC:ADDYY) may upgrade their outlooks, while those running behind schedule, such as Lufthansa AG (ETR:LHAG) and H&M (ST:HMb), may need to lower their full-year guidance if Q2 results fail to close the gap [2].

UBS remains cautious about 2025 due to tariffs and sluggish sales but expects a rebound in 2026, led by cyclicals tied to stimulus and consumer dis-saving. The bank points to the long-term potential of cyclicals despite current market headwinds, suggesting that investors should "hang on to cyclicals for the 2026 upswing" [2].

In other news, UBS Group AG (NYSE:UBS) stock reached a 52-week high of 35.85 USD, marking a significant milestone for the Swiss banking giant [3]. Despite regulatory challenges and capital requirements, UBS is maintaining its financial targets, including an underlying return on CET1 capital of around 15% by the end of 2026 [3].

References:
[1] https://finance.yahoo.com/news/ubs-continues-see-opportunity-u-131904392.html
[2] https://www.investing.com/news/stock-market-news/ubs-identifies-top-european-stocks-in-upcoming-q2-earnings-season-4128100
[3] https://ca.investing.com/news/company-news/ubs-stock-hits-52week-high-at-3585-usd-93CH-4095244