Capital Goods: Weekly Widget: Electricals 2Q previews. Stars aligning this quarter, but stocks now need consensus upgrades on 2027

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Capital Goods: Weekly Widget: Electricals 2Q previews. Stars aligning this quarter, but stocks now need consensus upgrades on 2027

IdeaMactivity is already depressed, which limits risk of a slowdown, while capex trends are

improving globally in US and China; (3) our companies continue to have pricing

power, and manage inflation, with scope for many companies to hold on to price

gains even as some of the cost elements (eg plastics) start to decrease. Our key

stock ideas continue to be a blend of Electrification names and other names

exposed to other areas where we see scope for accelerating organic growth. We

remain Overweight Schneider, Epiroc, Rexel, Siemens Energy, Atlas and Knorr

Bremse. In terms of our Underweight ideas, we remain Underweight Wartsila, Signify

and Kone. Our views have remained relatively unchanged, with the exception of our

recent GEA upgrade to Equal-weight.

We think a strong 2Q26 is expected, and the market debate is already shifting

towards 2H and 2027. In many ways, the debates are similar to the start of the year,

and are ultimately linked to whether the European Cap Goods companies can see

positive earnings revisions on 2027. These include whether lower European interest

rates can stimulate an improvement in European Industrial and Construction

activity, whether capex projects (eg US reshoring and Global greenfield mines) start

to get to get unlocked in a meaningful way, and finally, to what extent the

Electrification names can work as YOY order growth flattens out in 4Q26 and 1Q27.

In terms of themes for the next 12 months, we also continue to think about 1)

the discussion in Europe, around more protectionism with regulation (ie a potential

positive for German Industrial exposed names such as Siemens / Kion); 2) increased