Europe's food, drink, technology and financial companies are set to be the stars of the second-quarter earnings season thanks to a nascent regional recovery, while those selling to emerging markets may disappoint.
Market positioning and analysts' expectations sugggest the results, which start in earnest next week, will be an improvement on the first three months of 2013 - when STOXX Europe 600 earnings undershot forecasts by 0.8 percent.
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Although a weak euro ate into exporters' profits, oil prices sank and metals weakened during the quarter, the European economy finally showed signs of growth.
Consensus earnings expectations and forecasts from the historically most accurate analysts point to consumer staples - the makers and sellers of food, drink, household products and tobacco - delivering the biggest upside surprises.
StarMine's SmartEstimate - which uses the top analysts' forecasts based on accuracy and timeliness - points to consumer goods sector earnings beating consensus by 1.4 percent. Technology and financials are also forecast to beat consensus forecasts, while telecoms, industrials may disappoint.
"Whilst we have had a focus on exporters, because of the weak emerging markets it might be the domestic companies that outperform," James Butterfill, global equity strategist at Coutts said, noting recent improvement in euro zone PMI surveys of manufacturing and service sector activity.
By contrast, weak Chinese trade data for June on Wednesday fed into general caution on emerging markets, whose economic slowdown contributed to the International Monetary Fund's global growth downgrade on Tuesday.
Analysts have been cutting forecasts, with the consensus view cut more sharply than SmartEstimates' forecasts except in materials, for sectors which rely heavily on emerging market consumption.
"I am very cautious as regards to everything that's related to emerging markets, so I am also cautious on materials. We may see further downside in those sectors, and management will guide down the expectations," said Patrick Moonen, a senior equities strategist at ING Investment Management.
On a regional level, SmartEstimates pointed to scope for disappointment in the Nordics and to the biggest upside surprise potential for Italy, where HSBC reckons valuations and earnings expectations are at "unrealistically low levels".
Historically, when SmartEstimates differ from consensus by more than 2 percent, the gap has given an accurate steer for the likely earnings surprise two-thirds of the time.
High levels of short interest in some technology stocks and autos could make those the most sensitive to a bounce in the back of positive surprises.
French auto parts maker Valeo , Finnish mining technology company Outotec , telecom firm Nokia and German chip equipment maker Aixtron are in the European top 10 for short bets - indicating an expected near-term fall, according to Markit data, and all report results this month.
Overall, though, the data shows little sign of increased short bets on European companies ahead of the results season.
The options market also shows little expectation for a big negative reaction to earnings, with investors putting on 4 percent more upside "call" bets on EuroSTOXX 50 euro zone blue-chip index in the past two weeks than downside "puts" on Eurex.
(Editing by Louise Ireland)