JPMorgan releases Global Capital Goods 1Q26 preview: bullish on automation and E&C, with selective industrial stock opportunities
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JPMorgan releases Global Capital Goods 1Q26 preview: bullish on automation and E&C, with selective industrial stock opportunities
The report believes that after industrial activity bottomed, orders and sentiment improved, with better risk-reward in construction equipment, automation, E&C, and some small- and mid-cap industrials, while agriculture, building products, rental companies, and some waste material prices still face pressure.
- North American Class 8 net truck orders rose 90% year over year in 1Q26 and are viewed as likely to support earnings expectations for covered truck companies in the second half.
- OHR expects 2026 construction equipment sales in North America/Europe/China at -1%/+3%/+9%, respectively; the global construction equipment outlook remains positive, and OEMs such as CAT and DE may benefit from restocking.
- The outlook for U.S. construction spending is mixed: FMI expects total U.S. construction spending to rise 1% year over year in 2026, with data center spending up 23% year over year; however, the ABI remains below 50, indicating billing activity is still contracting.
- Agricultural end markets are regionally divergent, with clear weakness in Brazil, recent modest deterioration in North American retail sales, and relative stability or improvement in Europe.
- Among North American small- and mid-cap industrials, the report's preference order is Automation > Engineering & Construction > Specialty > Building Products, and it lists EXPO and ALNT as Q1 top picks.
Report interpretation
Overview
This is a JPMorgan first-quarter 2026 earnings preview slide deck on Global Capital Goods, Machinery/Waste Services, and North American small- and mid-cap industrials. The report covers multiple subsectors including machinery, construction equipment, agricultural equipment, trucks & components, waste services, automation, engineering & construction, building products, and specialty industrials, and combines high-frequency industry data from the U.S., Europe, China, Brazil, and other regions to assess 1Q26 earnings, orders, pricing, end demand, and stock selection.
Core views
The report's core view is that opportunities in the industrial capital goods sector remain largely structural overall. Large-cap construction equipment OEMs are supported by restocking and improving global construction equipment sales, with CAT and DE seen as likely to outperform expectations; truck orders have improved sharply, helping second-half expectations; automation and E&C benefit from long-term themes such as electrification, data centers, infrastructure, reshoring, and labor shortages. By contrast, agricultural equipment demand remains volatile, with weakness in Brazil; the building products outlook is mixed; rental companies are affected by margin concerns; and some companies' 2H-weighted guidance requires careful validation.
Analysis framework
The report uses a combination of top-down industry pulse checks and bottom-up stock selection: first tracking high-frequency indicators such as PMI, new orders, construction spending, construction equipment sales, truck orders, agricultural equipment retail sales, oil and gas rig counts, waste CPI, and recycled material prices, and then mapping these to subsector preferences, earnings estimate revisions, valuation normalization, and stock-specific risk-reward.
Methodology notes
Assess the direction of end-market demand through orders, output, retail sales, PMI, prices, and construction spending.
The report tracks 1Q26 high-frequency indicators across regions such as the U.S., Europe, China, and Brazil, as well as end markets including construction equipment, agriculture, trucks, waste, oil & gas, and automation.
Automation > Engineering & Construction > Specialty > Building Products.
The report ranks automation as the most preferred area, believing it is supported by a bottoming in industrial activity, improving orders, and long-term structural trends; E&C benefits from infrastructure and energy transition spending; Specialty has recurring revenue but is affected by macro volatility; Building Products has a more mixed outlook.
Screen stocks based on earnings upside, valuation re-rating, end-market trends, and execution risk.
Q1 top picks include EXPO and ALNT, while CSL and AOS are avoids; 2026 top picks include Valmont (VMI), Orion Group (ORN), Gates Industrial (GTES), and CSW Industrials (CSW).
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- EXPOQ1 Top Pick
- Strengths
- Listed as one of the Q1 top picks and is a selected name within North American small- and mid-cap industrial coverage.
- Weaknesses
- The report excerpt does not provide its specific earnings model or valuation details.
- Comparison
- Shows a positive preference contrast versus names on the avoid list such as CSL and AOS.
- Risks
- If macro volatility or project demand is weaker than expected, the stock-picking thesis may be undermined.
- ALNTQ1 Top Pick
- Strengths
- Listed as a 1Q26 top pick, supported by the themes of automation and improving industrial orders.
- Weaknesses
- Specific data on orders, margins, and valuation are limited in the current input.
- Comparison
- Falls within the report's preferred automation-related area and is favored relative to building products.
- Risks
- If the industrial automation recovery is delayed, upside in valuation and earnings may come under pressure.
- CSLRecommended Avoid
- Strengths
- Part of building products-related coverage and may have long-term exposure to demand for construction materials.
- Weaknesses
- The report remains cautious on Building Products and places CSL on the Q1 avoid list.
- Comparison
- Ranks behind automation and E&C in the preference order for subsectors.
- Risks
- Uncertainty in residential and non-residential demand, repair and remodeling, and margins may weigh on performance.
- AOSRecommended Avoid
- Strengths
- Has exposure to building products-related business.
- Weaknesses
- Included on the Q1 avoid list, reflecting unattractive near-term risk-reward.
- Comparison
- Below Q1 top picks such as EXPO and ALNT in investment priority.
- Risks
- Divergent demand in building products and cost pressure may affect earnings delivery.
- VMI2026 Top Pick
- Strengths
- Listed as one of the 2026 top picks and may benefit from long-term themes in infrastructure and industrial investment.
- Weaknesses
- The current input does not include detailed target price or valuation information.
- Comparison
- Listed alongside ORN, GTES, and CSW as 2026 top picks.
- Risks
- Project timing in infrastructure, execution, and raw material costs are the main uncertainties.
- ORN2026 Top Pick
- Strengths
- Listed as one of the 2026 top picks, with the E&C segment supported by infrastructure and energy transition spending.
- Weaknesses
- Execution on E&C projects remains a key constraint.
- Comparison
- Positioned in the Engineering & Construction subsector favored by the report.
- Risks
- Project delays, cost overruns, or budget changes may affect earnings quality.
- CAT/DElarge-cap OEM beneficiaries
- Strengths
- The report expects CAT and DE may deliver earnings upside, supported by the global construction equipment outlook and restocking.
- Weaknesses
- Agricultural end markets remain volatile, with weak demand in some regions.
- Comparison
- More favored by the report relative to rental companies.
- Risks
- Continued weakness in agricultural markets, less-than-expected construction equipment restocking, or tariff impacts could affect the view.
- GFLdowngraded to UW
- Strengths
- The waste services industry has pricing power and recurring demand characteristics.
- Weaknesses
- The report states that GFL was downgraded to UW following the transaction announcement.
- Comparison
- Estimate revisions in waste services mainly reflect fuel surcharges and intra-quarter M&A announcements, but the stock view on GFL has weakened.
- Risks
- Transaction integration, valuation, regulation, and cost volatility may create pressure.
Key data
- North American Class 8 net truck ordersup 90% year over year in 1Q26The report believes strong early-year orders may support expectations for covered truck companies in the second half.
- North American Class 8 productiondown 34% year over year 1QTD through FebruaryImproving orders coexist with weak recent production, and recovery in deliveries and scheduling needs to be monitored.
- OHR construction equipment sales forecast2026 North America -1%, Europe +3%, China +9%The global construction equipment outlook remains positive, with OEM restocking as an important support.
- U.S. total construction spending forecastFMI expects +1% year over year in 2026 and +4% in 2027Data center spending is expected to rise 23% year over year in 2026, a structural highlight.
- U.S. Architecture Billings Index49.4 in February, 43.8 in JanuaryImproved month over month but still below 50, indicating billing activity remains in contraction.
- U.S. manufacturing PMI1Q average 52.6, up 4.3 points from 48.2 in 4QIndicates manufacturing activity is improving from low levels.
- ISM New Orders Index1Q average 55.5, up 7.7 points from 47.8 in 4QImproving new orders support the view of a recovery in automation and industrial demand.
- North American oil and gas rig count2026 YTD average 744, above 2025 average of 7381Q26 average was 744, above 733 in 4Q25; the latest reading as of April 3 was 690.
- Commodity prices1Q copper +27% YoY, +12% QoQ; gold +70% YoY, +17% QoQHigher commodity prices support some industrial, energy, and resource-related capital spending.
- Waste CPIup 4.7% year over year in MarchWaste service pricing and cost indicators still need to be monitored.
Impact & implications
For investors, the report emphasizes that the capital goods sector cannot be traded simply on a single-cycle direction, but should instead be allocated around end-market divergence and structural themes. Automation, E&C, data centers, infrastructure, and construction equipment OEMs have clearer demand support; agriculture, rentals, building products, and parts of the waste chain require more evidence to confirm the quality of the recovery. During the near-term 1Q26 earnings season, earnings beats, improving orders, and management credibility on 2H will be key drivers of stock price reactions.
Risks
- Tariffs and S232-related policies may trigger sell-offs in capital goods stocks or raise supply chain costs.
- Ceasefires and geopolitical factors may alter energy, industrial demand, and risk appetite.
- Agricultural end-market demand remains unstable, with clear deterioration in large agricultural machinery sales in Brazil and some recent weakening in North American retail sales.
- Margin pressure at rental companies may offset the cyclical improvement in construction equipment.
- Some companies have steep 2H-weighted guidance; if orders and deliveries do not materialize, earnings expectations face downside revision risk.
- The demand outlook for building products is mixed, the ABI remains below 50, and non-residential and residential indicators show regional divergence.
- Prices for recycled waste materials have improved sequentially but remain sharply down year over year, which may affect related profits.
What to watch
- In 1Q26 earnings, monitor orders, deliveries, gross margin, and management guidance from companies such as CAT, DE, PCAR, TRMB, and ESAB.
- Whether North American Class 8 truck orders can convert into second-half production and revenue.
- Whether FMI construction spending, U.S. data center construction, European non-residential permits, and PMI continue to improve.
- Agricultural equipment retail data, especially demand for high-horsepower tractors and combines in Brazil and North America.
- Whether ISM New Orders, U.S. manufacturing PMI, and automation orders continue to improve.
- Transmission from oil and gas rig counts, copper prices, gold prices, and energy capital spending into industrial demand.
- The impact of Waste CPI, OCC, PET, HDPE, SOP, and natural gas prices on waste services company earnings.