The current earnings season in Europe is the poorest since the start of the Covid pandemic, with minimal prospects of a rapid recovery.

• The European economy has been impacted by the aftermath of Russia's invasion of Ukraine.
• The energy crisis in the region resulted in record high inflation.
• The European Central Bank's record high interest rates are currently making it more expensive for companies to obtain new financing, as the bloc is currently dealing with this issue.

Despite low expectations, around half of European companies still missed earnings targets during the latest reporting season, according to analysts speaking to CNBC. They predict that the region will continue to face challenges due to high interest rates.

Since the first quarter of 2020, when the pandemic first hit European firms, the smallest percentage of beats, or the worst earnings season, was recorded as of Feb. 29 with 313 companies having reported, according to a CNBC analysis of FactSet data.

According to FactSet data, the sectors that performed poorly in the last three months of 2023 were materials, consumer discretionary, and health care, while tech and utilities had the highest proportion of beats versus expectations.

According to Edward Stanford, head of European equity strategy at HSBC, who spoke to CNBC on Monday, the current level of beats is "pretty broad based" and has not been seen for a long time.

Kepler Cheuvreux's deputy head for economy and cross asset strategy, Philippe Ferreira, stated that there are several reasons for these disappointments.

A weaker macro environment in Europe, with GDP growth close to 0% in third and fourth quarters, a significant exposure to China for some companies, which has been a hurdle for instance, as China is currently experiencing deflation and lackluster consumer demand.

The European economy contracted by 0.1% in the third quarter, but the region's GDP rose by 0.1% in the fourth quarter, preventing a technical recession.

Due to the aftershocks of Russia's full-scale invasion of Ukraine, the European economy has faced challenges such as an energy crisis and record high inflation. As a result, the European Central Bank has increased interest rates, making it more expensive for companies to obtain new finance.

Share buyback bonanza

During this earnings season, European corporates are exhibiting a new trend, according to Sharon Bell, a senior European strategist at Goldman Sachs.

"A lot of companies have announced buybacks, which involves purchasing their own shares to increase their scarcity and boost their price, benefiting existing shareholders," she said on CNBC's "Squawk Box Europe" Tuesday.

European companies typically pay dividends rather than engaging in buybacks, she stated.

In 2024, Deutsche Bank, UniCredit, and other European stocks announced plans for share buybacks.

According to Goldman's Bell, the trend can be attributed to "reasonably good earnings in the last few years," "good balance sheets," and "a lack of buyers for European shares."

Despite strategists' optimism for the next reporting season, they are pessimistic about the tide turning.

Ferreira stated that European corporate earnings may face continued pressure due to a slowdown in growth, the absence of monetary policy support, and weak domestic consumer demand.

He stated that we anticipate a considerable difference between companies with exposure to U.S. consumers or fast-growing emerging markets, having more positive revenues, and those with less diversified geographical revenue streams.

CNBC's Ganesh Rao contributed to this article.