Investing.com -- JPMorgan said European Building Materials companies face a "tricky" third-quarter setup that could lead to slight earnings downgrades, as softer volumes and accelerating costs outpace pricing gains across much of the sector.
Analysts led by Elodie Rall said weaker sequential volumes reflect summer heatwaves that closed some European construction sites, alongside a fading catch-up effect and pre-buying that had boosted the second quarter. Costs have risen consistently through the quarter and will likely be worsened by hedging benefits rolling off, while further price increases are likely to arrive with a lag.
Regionally, analysts said U.S. trends look less positive, with its Construction Materials team flagging that full-year guidance is likely to be revised down industry-wide as margins remain under pressure from weak pricing realization. Europe looks more resilient, they added, owing to better pricing power for cement.
JPMorgan flagged guidance risk at U.S.-exposed names Amrize, which it placed on Negative Catalyst Watch, and CRH, where its estimates sit slightly below guidance. Buzzi and Heidelberg Materials, also exposed to the U.S. and rising costs, should benefit from favorable currency moves that mitigate some of the pressure, and JPMorgan expects both to reiterate guidance, which "would be well received."
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The bank also sees earnings risk at Saint-Gobain, though it had already trimmed estimates in its preview, as well as at Geberit and Rockwool. Sika's expectations have "somewhat derisked" since its pre-close update, and JPMorgan removed the stock from Positive Catalyst Watch, though it should still post above-sector-average like-for-like growth excluding China.
Analysts said they remain "most comfortable" on Holcim, which they placed on Positive Catalyst Watch ahead of its Oct. 23 results, seeing scope for a guidance upgrade. The bank's estimates call for 13% like-for-like EBIT growth versus guidance of 10%.
Kingspan is also well positioned, the bank said, as an inflation beneficiary set to benefit from continued data-center growth, with its upcoming capital markets day likely to lift mid-term targets.
JPMorgan said any guidance reiteration is likely to be well received given potential downgrades elsewhere, particularly in European Cement, which trades at about 7 times forward EV/EBITDA, with investors looking ahead to 2027, when the sector should see better pricing power and volume benefits from Germany's infrastructure stimulus.
Original Article
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