JPMorgan | SMID-Cap Industrials: Q3 Preview — Megatrends Converge with Margin Discipline; Aerospace & Defense Plus Nuclear and Power Infrastructure Are Core
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JPMorgan's third-quarter 2026 preview for North American small- and mid-cap industrials highlights a sector in transition toward capital discipline and operational excellence. The firm favors aerospace, defense and nuclear names, arguing they combine resilience with valuations that have already corrected, and sees power infrastructure as a clear structural winner from electrification and data center construction, with healthy backlogs and book-to-bill ratios above 1.1x. Automation demand also remains strong—North American machine tool orders were up roughly 72% year-on-year—and management guidance is generally conservative, leaving room for upgrades; second-half automation guidance is viewed as too cautious. By contrast, JPMorgan stays wary of building products and engineering & construction amid project-timing uncertainty and labor constraints. Moog raised its FY26 guidance by $50 million of sales and $1.05 of adjusted EPS. The report sees meaningful potential for power infrastructure estimate and valuation upgrades by year-end. Preferences include top picks MIR, CECO and TIC, avoidance of ROL and GPGI, a downgrade of ALNT to Neutral, and defensive exposure to ALH, MATX, MSA and SCI. Ratings cited: ADI Global Neutral ($20.00 target), Gates Industrial Overweight ($34.00), Service Corporation International Overweight ($100.00) and Perimeter Solutions Overweight ($40.00).
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