JPMorgan is adopting a measured stance as it heads into the fourth-quarter earnings season for European building materials, warning that near-term risks are concentrated among so-called Lightside businesses with exposure to the United States. Analysts pointed to specific U.S. dynamics - including the effect of a government shutdown and faster-than-expected destocking in roofing following limited storm activity in 2025 - as factors weighing on short-term trends for those names.
“Overall, for Q4, we would maintain a degree of caution into results, particularly on the Lightside names where we see greater downside risks into the quarter mostly for stocks with exposure in North America,” the JPMorgan team led by Elodie Rall wrote. The bank noted that initial reads from companies such as Sika and Geberit have already shown signs of this pressure.
JPMorgan's view separates the sector into Lightside and Heavyside segments. In its assessment, European market conditions are holding up relatively better and are helping to offset softness in the U.S., but the firm cautions that forward guidance issued by several companies could still disappoint. That concern is particularly acute where the bank expects weaker fourth-quarter conditions to extend into the start of 2026.
For Lightside businesses, JPMorgan said recent softer trends leave upside limited and bring risk to consensus expectations. By contrast, within the Heavyside segment the bank expressed greater comfort with names such as Heidelberg Materials, Holcim and CRH. JPMorgan expects management outlooks at those companies to broadly support current forecasts, while noting it does not anticipate substantial upgrades given typically conservative guidance from management teams.
The analysts also called out Buzzi as a company likely to present a more cautious tone on forward expectations when it reports. Even with that caution, JPMorgan identified a small group of stocks where earnings results have the potential to act as a clearing event for investors. Two names highlighted were Saint-Gobain - where the bank believes downside risks from U.S. roofing exposure are largely reflected in current investor sentiment - and Rockwool, although the analysts cautioned that Rockwool's shares tend to be volatile around results.
JPMorgan moved Rockwool to an Overweight rating, arguing that the disposal of its Russian assets removes an important overhang and should reduce earnings volatility going forward. In contrast, the firm placed Howden on Negative Catalyst Watch ahead of its results, flagging the risk that consensus assumptions for 2026 earnings growth may be too optimistic.
Overall, JPMorgan's stance suggests selective opportunities amid broader caution: while Lightside names face clearer downside pressures from U.S.-related factors, certain Heavyside companies and a handful of select stocks could either validate or reset investor expectations depending on how management commentary and quarter-on-quarter results play out.
Context for market participants
- Analysts expect European demand trends to partially offset U.S. weakness, but they see potential for muted guidance through early 2026.
- Stocks with North American exposure remain the primary concern for near-term downside risks, according to the bank.
- Some companies could provide clarity to investors, serving as clearing events, while others may signal continued caution from management.