Goldman Sachs Adds Four European Stocks to Conviction List on Earnings Outlook

Goldman Sachs has added four European companies to its influential Conviction List for October, citing improving earnings prospects, attractive valuations, and potential for stronger demand. In a research note dated Thursday, the investment bank added Spain's Solaria, Switzerland's Straumann and Scout24, and Dutch firm IMCD.

Catalysts for New Additions

Goldman's analysts provided specific rationales for each new addition, highlighting potential turning points for the businesses.

• Solaria: The bank believes the market is underestimating improvements in the Spanish renewable energy company's core solar business amid strengthening prices. Goldman analyst Alberto Gandolfi also pointed to growth potential from data centers and energy storage, noting a recent sell-off has created an "attractive risk-reward setup."
• Straumann: The Swiss dental equipment maker is expected to benefit from a sales recovery, aided by improving inventories in China and stronger profit margins. Analyst Richard Felton added that the company's valuation is near its lowest level in almost a decade.
• Scout24: For the Swiss online marketplace, analyst Adam Berlin sees new products supporting growth in private subscribers, placing his estimates above market consensus. He also noted the potential for higher-than-expected cash returns to shareholders.
• IMCD: Analyst Suhasini Varanasi said the chemical distributor could be nearing a turning point in volumes. She expects its specialized product mix to support pricing, with improving economic data providing an additional tailwind.

List Removals and Other Ratings Changes

To make way for the new additions, Goldman Sachs removed Spanish utility Naturgy, Norwegian aluminum producer Norsk Hydro, and UK medical device maker Smith & Nephew from the Conviction List. The bank's note did not provide specific reasons for the removals.

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Goldman emphasized that changes to its Conviction Lists do not alter the firm's underlying investment ratings on the stocks. Separately, the bank upgraded Spanish utility Iberdrola to “Buy” from “Neutral,” raising its price target by 19% to €25 on expectations of double-digit growth through 2031.

Broader European Market View

Goldman also reiterated its positive stance on several other European companies. The bank maintained a “Buy” rating on BMW, seeing 48% upside after the automaker reaffirmed its 8%-10% EBIT margin target and outlined plans for profitability improvements.

Similarly, it retained a “Buy” rating on French steel tube maker Vallourec, which trades at a significant discount to peers, though Goldman's near-term earnings forecasts are below consensus due to its exposure to the Middle East.