According to a latest report from Deutsche Bank, earnings of FTSE 100 companies are expected to fall 6% year-on-year in the first half of 2025, with the energy sector expected to be the biggest drag.
Excluding the energy sector, earnings are expected to remain flat. In contrast, the financial sector is expected to make a positive contribution.
On a sequential basis, earnings are expected to grow 2% from the second half of 2024. The real estate and consumer discretionary sectors are expected to lead industry growth, with increases of 14% and 12%, respectively.
The energy sector is expected to shrink 37% year-on-year, while the basic materials sector is expected to fall 21%.
FTSE 100 sales are expected to fall 2% year-on-year, with the energy sector again being a drag.
Excluding the energy sector, sales are expected to remain flat. The financial and real estate sectors are expected to be the strongest contributors.
On a sequential basis, sales are expected to decline slightly from the second half of 2024, while overall margins are expected to expand due to improved profitability performance.
Earnings forecast revisions have been large since April, driven mainly by concerns about global trade tensions, with FTSE 100 earnings forecasts for the first half and full year 2025 cut by 7%.
Although negative adjustments have decreased in recent weeks, consensus expectations remain low.
The brokerage noted that as the trade environment has stabilized since April, this could leave room for minor positive surprises.
For the full year 2025, the consensus forecast for FTSE 100 earnings is a fall of almost 3%. Although Deutsche Bank cut its own forecasts in March, it thinks full-year growth of 2% is possible, citing improved GDP growth in the UK and the eurozone, easing trade uncertainty, and further rate cuts from the Bank of England and the European Central Bank.
However, political risks, further trade disruptions and currency strength remain downside risks.
Deutsche Bank also analysed first quarter corporate commentary. Most FTSE 100 companies kept guidance unchanged.
Businesses reported limited direct impact from tariffs and were more concerned about indirect effects, such as weaker global demand.
Some companies cited cost pressures from rising national insurance contributions, but they maintained their cost guidance and pointed to ongoing efficiency measures.
Currency impacts were mixed, with a weaker dollar benefiting some companies reporting in dollars, while a stronger pound sterling posed challenges.
Compared with the FTSE 100, FTSE 250 earnings are expected to grow 1% year-on-year in the first half of the year.
The increase was mainly attributed to the real estate and energy sectors. The mid-cap index, which is more focused on the UK market, has faced a smaller 5% earnings downgrade since April. Month-on-month, FTSE 250 earnings are expected to fall 1% from the second half of 2024.