European Construction Companies' Relief Following French Elections Is Short-Lived -- Sector Preview

Dow Jones07-15

By Nina Kienle

Companies operating in the European construction sector are expected to experience only short-term relief after the French elections, according to analysts. Further demand softness is expected due to an already constrained environment, analysts said. Here is what you need to know:

WHAT TO WATCH

-- FRENCH ELECTIONS: Though the French legislative election results dissipated some uncertainties, the French market could be volatile until the 2027 presidential elections due to the potential creation of a coalition government, Stifel analysts Augustin Cendre and Tobias Woerner said in a research note. According to analysts at Baader, changes in the government's spending brings risks, as in the case of Alstom, whose domestic market, France, accounts for around 16% of group sales. Saint-Gobain also depends heavily on the macro-economic outlook, with any major headwinds in its key regions potentially hurting estimates, Jefferies analysts said. However, the performance of Saint-Gobain is usually treated as a proxy for the sector in Europe, and the company could benefit more than peers from a cyclical recovery, Barclays analysts said in a note in May.

-- FOCUS ON CASH: In a constrained growth environment investment cases could increasingly focus on cash generation with many balance sheets offering scope for mergers and acquisitions, Jefferies analysts said in a note.

-- OUTLOOK: Weakness in construction activity and business sentiment indicators outline further demand softness into the second quarter and while improving housing affordability and declining construction costs provide small support to the demand outlook, investors are likely to follow incremental trends in sentiment to offer any strong signs of stability, Citi analysts said in a research note. However, Saint-Gobain, Vinci and Heidelberg Materials backed their full-year targets after first-quarter results. Alstom's 2025 guidance is in line with consensus expectations.

WHEN COMPANIES ARE SCHEDULED TO REPORT:

-- Alstom: July 23

-- Saint-Gobain: July 25

-- Vinci: July 25

-- Heidelberg Materials: July 30

Write to Nina Kienle at nina.kienle@wsj.com

(END) Dow Jones Newswires

July 15, 2024 09:08 ET (13:08 GMT)

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European Construction Companies' Relief Following French Elections Is Short-Lived -- Sector Preview

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