European stock market 2024: key sectors driving growth

The Europe Business Observatory looks back at Europe’s top performing sectors in 2023.

As 2023 draws to a close, European stocks have reason to celebrate, with the pan-European index up 20% and beating many expectations at the start of the year.

However, this upward trajectory is not evenly spread across sectors, meaning that the diverse economic environment provides a wide range of investment opportunities for the year ahead.

2023 Recap: Industry Highlights and Disappointments

The best performing European sector in 2023 was information technology with a solid gain of 19%. A closer look at the sector reveals that Dutch company BE Semiconductor Industries NV, also known as Besi, is up 152% year-to-date. Besi specializes in semiconductor assembly equipment and its strong growth underlines its innovation capabilities. Another strong performer was ASM International NV with a significant increase of 103%. The company is known for its expertise in semiconductor manufacturing equipment.

Consumer goods is the second best performing sector with a gain of 18%. Leading the pack is Denmark’s Pandora A/S, known for its customizable charm bracelets, which posted a remarkable 96% increase.

Industrials also held up, up 17%, led by an exceptional 225% gain in Britain’s Rolls Royce Holdings plc.

Despite these successes, not all sectors fared well. The healthcare sector underperformed with an average return of 5.9%. In contrast, its heavyweight giant, Novo Nordisk A/S, rose more than 50%.

Meanwhile, the utilities and energy sectors lagged with gains of just 7% and 9%, respectively.

Towards 2024: which European industries are poised to outperform?

For 2024, the picture is cautiously optimistic, with analysts forecasting median sales growth of 6.2% and expected earnings growth of 4.3% among the 1,019 stocks in the MSCI Europe index.

Europe’s real estate sector is expected to shine and benefit from the expected cut in interest rates, with average sales growth expected at 10.6% and profits at 5.7%. Shaftesbury Capital PLC, a property investment company, is expected to lead the pack with a forecasted 122% increase in revenue.

Finance companies, whose sales are expected to grow 7.7% and profits 15.4%, could benefit from a more stable economic environment as inflation and borrowing costs fall. Admirals Group plc could lead the financial sector with a robust 160% growth in forecast revenue, demonstrating the power of digital finance.

The healthcare industry is expected to see average revenue growth of 7.8% and profit growth of 2.2%. The standout stock in the sector is expected to be Zealand Pharma A/S with a remarkable 275% growth in forecast earnings, likely due to breakthroughs in biopharmaceuticals.

The information technology sector remains a beacon of growth with a median revenue increase of 7.7% and profit growth of 4.1%. Meyer Burger Technology AG is expected to experience phenomenal revenue growth of 97% and ride a wave of innovation in solar and semiconductor technology.

The industry is in good health with average sales growth of 6.8% and profit growth of 10.9%. ITM Power plc, which specializes in hydrogen-based energy solutions, is expected to post a 272% rise in revenue, reflecting the growing shift to green energy.

For the consumer goods sector, sales are expected to increase by 6.2% and profit by 6.4%. Leading the pack is British luxury car retailer Inchcape plc, which is expected to see a 42% rise in sales.

Other sectors such as utilities, energy, consumer goods and materials are expected to underperform both in terms of revenue and expected earnings.

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