European Industrials: A Hotbed of Growth for Equity Investors

Today’s industrial business models offer surprising sources of consistent earnings growth.

Investors seeking growth in European equities might be discouraged by the lack of technology titans that dominate US markets. But Europe is home to a different type of growth, thanks to industrial companies that offer diverse sources of return potential.

When investors think about growth stocks, industrials aren’t usually the first thing that comes to mind. Industrial businesses are often perceived to be tied to macroeconomic cycles—hardly the types of companies that equity investors associate with consistent, long-term growth.

Gauging the Growth Profile

But in Europe, that perception isn’t quite right. In fact, industrials are the largest sector in the MSCI Europe Growth Index with a 22% weight (Display). That’s nearly four times the weight in the comparable US benchmark, where the Russell 1000 Growth Index is technology heavy.

Industrial Stocks in Europe Offer Attractive Earnings Growth Potential

As a sector, European industrials offer solid and improving earnings growth. Consensus earnings estimates for industrials in the MSCI Europe Growth Index are expected to increase from 11.9% in 2024 to 15.9% in 2025 (Display). That’s in line with next year’s earnings estimates for the US technology sector. In the European growth benchmark, the technology sector includes only 15 stocks and is dominated by two large companies, so earnings can be volatile.