Here's what JP Morgan thinks will drag corporate profits out of the doldrums

Despite a reprieve in the Eurozone crisis over the course of 2013, corporate profits remain at pre-recession lows.

JP Morgan has cast doubt on whether forecasts for earnings per share (EPS) will be as high as anticipated for 2014. The International Broker's Estimate System (IBES) forecasts EPS growth in Europe of as much as 16 per cent. JP Morgan's estimate comes in substantially lower at 12 per cent.

The current consensus projection of a meagre five per cent year on year EPS growth in Europe is less than half of what was expected in October.

The multinational bank emphasised the key to supporting stocks was for earnings to show outright growth and escape the stagnation of the last three years.

The research note expects banks to benefit from the fall in the cost of equity as well as possible rollover in provisioning. However, JP Morgan continue to believe that the earnings upswing is not dependent on an improvement in loan growth and does not expect it to pick up anytime soon.

While there has been some decoupling between subdued earnings and indicators such as purchasing managers' indexes, this gap can be largely be explained by the recent deflationary scare.

However, the underlying earnings picture may not be as bad as it seems. The note highlights that weakness in earnings is primarily concentrated in only three areas: Commodities, Telecoms and Utilities.

Looking to the future, JP Morgan believe financials and discretionary sectors offer the best scope for growth in earnings. However, the bank does not see a positive earnings backdrop in: Mining and Energy, as well as Utilities, Chemicals, Staples and Capital Goods.