J.P. Morgan lifts Rexel to “overweight” on earnings rebound, data-center tailwinds

Investing.com -- J.P. Morgan on Friday upgraded Rexel (EPA:RXL), the French electrical-products distributor, to “overweight” from “neutral,” raising its December 2026 price target to €39.5 from €27.50, saying the company’s “Earnings growth set to accelerate” after several years of underperformance. 

The brokerage said the valuation implies about 32% upside from the stock’s €29.87 closing price on Nov. 13.

The analysts said Rexel is positioned to narrow its earnings gap with electrical-equipment suppliers after lagging peers due to weaker exposure to grid and data-center markets. 

In the recent report, they said, “We see acceleration in growth ahead driven by a recovery in European resi, organic success in US data centers and an easing of headwinds in the solar and US automation markets.” 

The brokerage now forecasts 30% adjusted EPS growth over the next two years, with updated estimates of €2.52 for 2026 and €2.82 for 2027.

J.P. Morgan said Rexel is showing clearer signs of a revenue rebound. Management has upgraded internal growth expectations, and the bank noted that “Q4’25 should see the highest organic growth in almost 10 quarters.” 

Organic growth is now projected at 4.2% in 2026 and 4.4% in 2027, compared with a 1.9% decline in 2024 and a 2.2% increase in 2025. 

The analysts pointed to improving conditions in European residential markets, where about 25% of Rexel’s group revenue is concentrated, adding that France’s housing starts through September were up 6% and permits up 19% year over year.

The U.S. business, which represented 46% of revenue in the first nine months of 2025, remains a key driver of the brighter outlook. 

The brokerage highlighted that “data center business, together with broadband infrastructure, was up ~50% y/y in Q3, accounting for more than half of US growth.” 

Data-center sales alone now represent “over 5% of sales in the US,” a growing share supported by capex from major hyperscalers.

 J.P. Morgan said the data-center expansion could provide “>200bps tailwind to US growth in 2026.”

Margins, previously under scrutiny, are also stabilizing. Rexel is still on track to meet its near 6% adjusted EBITA margin target for 2025. 

Analysts wrote that the company “successfully defended its margins despite no or little volume growth,” noting that margins remain “significantly above the 4–5% range pre-COVID.” 

With volume growth expected to resume from late 2025, J.P. Morgan anticipates margin expansion to 6.3% in 2026 and 6.6% in 2027. The bank described its margin assumptions as “conservative/below management’s guidance of >7% in the medium term.”

On valuation, the analysts said that Rexel trades at a “~50% discount to some of its suppliers” and that its revised multiple of 11.5x EV/EBITA—up from 9x—still equates to a 14x adjusted P/E, a “~15% discount to US peer Wesco’s FY2 Adj PE multiple.” 

They added that the stock’s 4% dividend yield and c12x P/E should appeal to value-oriented investors.

The bank cautioned that risks include deflation from input-cost declines, weaker volume recovery, slower solar-related activity, and any high-priced acquisitions, as well as a potential downturn in residential construction.