Europe First to Market

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Europe First to Market

Europe Equity Research

Europe First to Market 07 July 2026

Today’s Morning Meeting | Also Published Today | Key Changes | JPM Events | Upcoming Earnings

You are cordially invited to the J.P. Morgan Equity Strategy update virtual conference with Mislav Matejka,

today at 3pm UK time. Please contact your Sales representative for registration details.

Today’s Morning Meeting

AFL | CW | European Building Materials (Elodie Rall/Zaim Beekawa/Adrian E Huerta)

Easing inflation supportive of improving earnings momentum; warming up to Lightside

In this note, we explore the implications for price/cost should we see a permanent end to the Middle East conflict and a

subsequent normalization of input costs to pre-conflict levels. Overall, we find that should the sector succeed in maintaining its

recent price increases despite cost inputs falling, then on average margins would be higher by ~125bps; we would however,

note that pricing may see some erosion particularly in relation to fuel surcharges as well as companies historically passing back

and maintaining a margin (i.e Kingspan). Overall, from a sector point of view, we think given the ytd underperformance (13% vs.

SXXP), we see scope to be more positive given (i) Q2 trends should show an inflection point on LFL trends and lead indicators

in Europe continue to screen positively (excluding the UK) and (ii) potential tailwinds on price/cost (and margins) should

continue to see a softening of input costs. Furthermore, whilst we have long held a preference for the Heavyside sub-sector

(which has been a strong outperformer vs. Lightside), we think the aforementioned backdrop on volumes and price/cost could

lead to positive momentum for the Lightside sub-sector.