Key Moments
- JPMorgan sees strong upside potential for selected European capital goods stocks in 2026. Order backlogs, margin expansion, and strategic positioning drive this view.
- Specifically, Siemens Energy, Alstom, Siemens, Sandvik, and IMI stand out for solid earnings growth, strong free cash flow, and attractive valuations.
- Large backlogs support revenue visibility. Alstom exceeds €95 billion, Siemens Energy reaches €138 billion, and IMI could generate over £1 billion in free cash flow from 2025–27.
JPMorgan’s Sector View
JPMorgan expects European capital goods companies to deliver meaningful growth in 2026. According to the bank, several names combine strong fundamentals with visible growth drivers.
Moreover, these companies benefit from large order books, rising profitability, and exposure to structurally expanding end-markets.
Siemens Energy: Structural Growth and Ratings Upgrade
Siemens Energy ranks among JPMorgan’s top five ideas in the sector. The bank highlights effective execution by management and expects earnings growth through 2028 to outpace peers.
Importantly, the company has secured long-term service contracts for power assets. These agreements extend into the 2040s and support durable profitability.
JPMorgan sees more than 50% upside over the next 12–18 months, even after the recent rally. Notably, free cash flow from Gas Services alone could justify the current valuation.
At roughly 23x FY27 P/E, the bank views the stock as inexpensive relative to its growth profile.
Momentum has improved following Moody’s upgrade to Baa1. The agency cited solid operating performance and a €138 billion backlog. Meanwhile, activist investor Ananym Capital is pushing for a strategic review of wind operations.
| Company | Key Metric | Figure | Comment |
|---|---|---|---|
| Siemens Energy | Order backlog | €138 billion | Supports long-term revenue visibility |
| Alstom | Order backlog | €95+ billion | Strong rail-market pipeline |
| Alstom | New contract value | €746 million | 117 electric trains for Portugal |
| Sandvik | Gold exposure | 37% | Above sector average of 30% |
| IMI | Expected FCF (2025–27) | Over £1 billion | Enables buybacks or M&A |
Alstom: Rail Backlog and Margin Expansion
Alstom benefits from a backlog exceeding €95 billion. As a result, the company enjoys strong revenue visibility in the rail sector.
JPMorgan notes that management is replacing loss-making Bombardier contracts with higher-margin work. At the same time, growing volumes and services support profitability.
The bank forecasts roughly 150 basis points of adjusted EBIT margin expansion through FY28. In addition, Germany’s plan to double rail spending could drive new orders from 2026.
Recently, Alstom reported solid order intake and reaffirmed guidance. It also secured a €746 million contract to supply 117 electric trains to Portugal.
Siemens: Valuation Support Ahead of 2026 Catalysts
After its Capital Markets Day, Siemens presents an attractive setup into 2026. JPMorgan highlights three key catalysts.
First, regulators may approve the Siemens Healthineers spinout in H1’26. Second, guidance appears conservative relative to high-single-digit EPS potential. Third, management favors bolt-on acquisitions over large deals.
At 17.9x 2026 P/E, Siemens trades at a discount to peers. This comes despite what JPMorgan considers a best-in-class portfolio.
The company recently posted 16% year-over-year revenue growth in Q4, beating expectations. It is also preparing to distribute part of its Siemens Healthineers stake to shareholders.
Sandvik: Leveraged to Mining and Gold Upswing
JPMorgan is especially constructive on the mining cycle in 2026. In particular, Sandvik stands out due to its 37% gold exposure.
Short-cycle activities have improved and no longer weigh on results. Instead, they delivered an upside surprise, with 8% organic order growth in Q3.
With gold projected to reach $5,000/oz by Q4’26, JPMorgan sees Sandvik’s backlog supporting further earnings growth. The stock also offers a 7.0% 2026 free cash flow yield.
This yield sits well above that of mining OEM peers and the broader sector.
IMI: Operational Transformation and Capital Allocation Options
Since Roy Twite became CEO in 2019, IMI has delivered clear operational improvements. The company has lifted growth, margins, and return on capital.
As a result, adjusted EPS has grown at an 11% CAGR. Despite this, IMI now trades at a roughly 21% valuation discount.
JPMorgan forecasts more than £1 billion in free cash flow from 2025–27. Therefore, the company has flexibility to pursue buybacks or acquisitions.
Recently, IMI agreed to sell its Truflo Marine business to Fairbanks Morse Defense for £225 million.
Summary
Overall, JPMorgan highlights strong order books, rising margins, and disciplined capital allocation across its preferred names.
Consequently, the bank believes Siemens Energy, Alstom, Siemens, Sandvik, and IMI are well positioned for solid performance in 2026.
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