Kepler Cheuvreux has issued a fresh assessment of the European capital goods sector, examining 75 firms that each exceed a EUR2 billion market capitalization. Using a blend of quantitative screening and qualitative judgement, the research team selected areas and individual companies they expect to perform relatively well into 2026 amid a generally slow cyclical recovery.
The report identifies the United States and India as focal points for growth, and singles out a number of end markets where demand should be strongest. Those segments include data centers, power generation, electrical infrastructure, rail and ports. The analysts see a clearer cyclical upswing for mining and semiconductor equipment, whereas industrial machinery and automation equipment are expected to post more subdued recoveries, particularly within core European markets.
Top five most preferred stocks
Kepler Cheuvreux lists five names as its most preferred picks in the European capital goods universe for 2026. Each is rated Buy under the house framework and is supported by a target price set by the firm.
- ABB - Upgraded from Hold to Buy with a new target price of CHF70. Kepler Cheuvreux has increased its forecasts for ABB, citing the company s positioning across key growth markets and improving fundamentals as reasons for the upgrade. The report also notes an unrelated research action by another broker: Jefferies recently downgraded ABB India to a Hold rating on concerns around potential margin pressure and competition, despite ABB India posting quarterly earnings that exceeded expectations.
- Halma - Rated Buy, target price 4,150p. Halma stands out among the largest-cap names in the study, those above EUR10 billion, due to a blend of growth potential and quality metrics. The company has expanded its safety-related portfolio through acquisitions, buying E2S Group, an industrial safety specialist, for £230 million and Safetec, an Italian fire and gas safety solutions provider, for €72.5 million.
- GEA Group - Rated Buy with a target price of EUR75. GEA is identified as a leading pick in the EUR2-10 billion market capitalization bracket. Kepler Cheuvreux highlights a combination of favourable quantitative indicators and supportive qualitative factors that underpin the firm s view. The report references a separate analyst action from UBS, which retained a Buy on GEA and increased its price objective to EUR74, citing improvements in quality and solid sales visibility.
- Lagercrantz - Rated Buy, target price SEK270. Positioned among the mid-cap cohort, Lagercrantz is expected to generate strong performance under the house methodology that evaluates intrinsic value, growth, momentum and quality.
- Spirax Group - Rated Buy, target price 8,860p. Rounding out the top five, Spirax Group is highlighted for its potential to outperform in 2026 based on the report s combined quantitative and qualitative appraisal.
Least preferred names
The report also flags a set of least preferred stocks. These include Alstom, Autostore, Krones, NKT and Siemens. Within this group, Krones and NKT were downgraded to Reduce. The house lowered Siemens s target price to EUR230 and set Alstom s target at EUR25.
Implications and context
Kepler Cheuvreux s work underscores that growth within capital goods will not be uniform. Demand is expected to cluster in specific geographies and end markets, notably where investments in digital infrastructure and heavy electrification are taking place. At the same time, certain cyclical segments such as mining and semiconductor equipment appear positioned for clearer recoveries than general industrial machinery and automation in Europe.
Investors reviewing the sector should note the differentiated outlook across subsectors and market caps that Kepler Cheuvreux emphasises. The firm s top picks span large-cap global names and mid-cap specialists, reflecting its combined evaluation of momentum, intrinsic value and quality indicators.
Summary
Kepler Cheuvreux screened 75 European capital goods companies above EUR2 billion market cap and selected five Buy-rated names for 2026: ABB, Halma, GEA Group, Lagercrantz and Spirax Group. The house expects growth to be concentrated in the US and India, and strongest in data centers, power generation, electrical infrastructure, rail, and ports. Mining and semiconductor equipment are seen as likely to enjoy clearer cyclical upturns, while industrial machinery and automation may face more muted recoveries in core European markets.