BofA Securities Names Top Building Materials Picks, Citing Earnings Momentum and Value

Bank of America Securities is advocating for a barbell investment strategy in the European and U.S. building materials sector, according to a new analyst note. The brokerage favors stocks with strong earnings momentum and attractive valuations on one end, balanced by undervalued names with recovery potential on the other, while remaining cautious on companies facing rising capital expenditures.

Momentum and Value Selections

BofA named several companies as its top picks, citing a combination of positive earnings trends and compelling valuations. The firm's selections include:

• Saint-Gobain, with a price objective of €112
• Kingspan, with a price objective of €120
• Ferguson, with a price objective of US$315

On the value side of the strategy, the bank highlighted Heidelberg Materials and Buzzi as having attractive entry points following significant underperformance year-to-date. BofA set price objectives of €210 for Heidelberg Materials and €55 for Buzzi, noting that potential upside is linked to a recovery in German demand.

Ratings Changes and Cautious Stance

Ad

The brokerage reiterated its "Underperform" rating on Rockwool and Sunbelt Rentals, flagging concerns over rising capital expenditure and eroding returns for both companies. Additionally, BofA downgraded Amrize to "Underperform" from "Neutral," citing earnings risks and execution concerns, and cut its price objective to $40/CHF32.

BofA holds a "Neutral" rating on Sika, Holcim, and Geberit. While the firm acknowledged positive earnings momentum for these stocks, it views their current valuations as fair. The price objective for Sika was raised to CHF200/$25, while Holcim's was set at CHF80 and Geberit's at CHF600.

Sector Outlook and Catalysts

According to BofA, second-quarter results were generally stronger for "light-side" building products, driven by better-than-expected volumes and resilient pricing, which led to estimate upgrades. In contrast, "heavy-side" product results were more mixed amid cost inflation, leaving full-year forecasts largely unchanged.

Looking ahead, the bank sees potential for a sustainable demand recovery in parts of Europe but noted risks of a slowdown in France and continued weakness in the UK. In the U.S., housing trends remain muted, though non-residential markets appear to be holding up. Key catalysts for the sector through the end of the year include U.S. infrastructure funding discussions, the Atlantic hurricane season, and 2027 pricing announcements.