The gap in corporate earnings between the U.S and Europe is at an “unprecedented” 25 year high, according to UBS, which predicts that profits in Europe are set to rebound to the pre-crisis peak within three years.
Earnings per share (EPS) for European companies are 25 percent below their peak in 2007, while for the U.S. they are 20 percent higher than the 2007 peak.
“We are due some profit growth,” Karen Olney, a strategist at UBS, told CNBC Monday, referring to European stocks.
According to her, European companies can reach peak profit levels by 2016 despite some bearish economists predicting Japanese-style stagnation for the euro zone.
“While there are risks, we suggest it may not be as demanding as some think,” she said in a research note on Monday.
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