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Disappointing earnings season? Not in Europe

Europe's earnings season has so far churned out generally positive results -- something that could help regional stocks continue to outshine their U.S. and Japanese peers in the coming months.

On Wednesday, German automaker Volkswagen unveiled a 17 percent jump in first-quarter operating profit on cost cuts and improving demand in Europe. Meanwhile, the U.K.'s biggest household goods retailer – Home Retail Group – posted a 14 percent rise in annual profit.

Volkwagen Bus
Sven Storbeck | Wikipedia
Volkwagen Bus

Of the 107 European companies that reported earnings up to Monday's close, 60 beat sales estimates, while 18 missed, Barclays said in a note on Wednesday. Some 25 firms beat estimates on earnings per share (EPS), while 16 missed.

Read MoreVolkswagen profit jumps 17% on European recovery

"The median sales and earnings surprise is a strong 1.4 percent and 2.8 percent respectively," Barclays said.

Aided by a 20 percent fall in the euro's value against the dollar in the past year, a 40 percent slide in oil prices since last June and a one trillion euro ($1.10 trillion) stimulus package from the European Central Bank, European equity markets have had a stellar start to 2015.

The pan-European Euro Stoxx 600 index has soared almost 19 percent so far this year, outpacing a 2.7 percent gain in the S&P 500 index of U.S. stocks, and a 15 percent rally in Japan's blue-chip Nikkei.

Momentum

Analysts had said that in order for European stocks to maintain their momentum, positive news on the earnings front was necessary. This is something that is now starting to materialize.

"We find that the average company that has reported this season has had upgrades to both full-year sales and EPS estimates since the day of announcement," Barclays said. "The long-awaited recovery in earnings seems to be coming through."

Speaking to CNBC Europe's Closing Bell on Monday, Christopher Mahon, director of asset allocation research at Barings, added: "In the equity world, you're still getting dividend yields of 4 percent here in the U.K. and I think that will be increasingly valuable to investors as they scurry around looking for income."

The positive tone to European company earnings compares with some disappointing news from across the Atlantic. Micro-blogging website Twitter, for instance, on Tuesday saw its shares tumble 18 percent after first-quarter sales fell short of estimates.

Ford Motor on Tuesday, meanwhile, posted quarterly earnings and revenue that fell short of analyst expectations, while tech giant Google's quarterly earnings, reported last week, also missed analyst expectations.

Read MoreGoogle earnings and revenue fall short of expectations

On track

According to data from Thomson Reuters, European companies are heading for their best earnings season in four years.

"We re-iterate our forecast for Europe ex-U.K. earnings to grow by 25 percent this year, more than double the consensus," analysts at HSBC said in a note Wednesday.

"We also see this improved earnings outlook driving further global investor interest in European equities, especially relative to the U.S. where earnings are already at a record high and dollar strength is beginning to take its toll," they added.

Still, that's not to say the sailing will be smooth.

Michael Wolf, the CEO of Swedbank, which on Tuesday unveiled first-quarter net earnings above market expectations, told CNBC that the current environment was "challenging."

"We are producing stable results in an environment that is quite challenging and there are so many factors effecting banks right now – low interest rates, deregulation, digitalization," he said.

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