Investing.com -- Jefferies outlined a 2026 roadmap for multi industrial stocks built around growth in power and data centers, margin expansion through internal productivity efforts, and a turn in the capital spending cycle after two years of weak volumes.
The brokerage upgraded Pentair, John Bean Technologies and Middleby to Buy, while cutting Emerson Electric and Veralto to Hold.
Jefferies said power and data centers remain the fastest growing parts of the sector and should continue to drive orders into next year.
Vertiv is its preferred way to play the data center build out, with sales seen rising to about $20 billion by 2029.
TE Connectivity expects AI and cloud revenue to double to more than $3 billion within two years, while Flowserve continues to see strong power related demand with bookings up 23% in the third quarter. Jefferies said it expects margin gains across the group from operating leverage, 80 20 programs and factory consolidation.
Jefferies sees John Bean Technologies growing earnings at about 20% a year through 2027 as it delivers cost synergies and operating leverage that lift adjusted EBITDA margins to 19% percent.
Pentair has expanded return on sales by about 600 basis points since 2022 despite two years of mid single digit organic declines, and Jefferies expects volumes to turn positive in 2026, adding another leg to its margin story. It also sees further gains at Wabtec as integration savings increase.
Jefferies said spending was deferred this year amid uncertainty but should improve as tariff pressures ease and the impact of US industrial legislation builds.
Lincoln Electric and ESAB will return to mid single digit organic growth in 2026, with margins supported by internal efficiency programs.
Rockwell Automation will benefit from a rebound in capital spending, while Graco is positioned for organic growth next year with easier comparisons and stabilizing orders.
Jefferies cut Emerson after its transformation plan and updated guidance reduced near term upside.
It downgraded Regal Rexnord as its turnaround takes longer and Veralto on valuation and limited catalysts. Middleby’s upgrade reflects buybacks, portfolio moves and capital deployment, while Jefferies said Pentair remains its top pick entering 2026.
