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Investing.com -- J.P. Morgan has shifted its outlook on major European consumer staples ahead of the third quarter, placing French food group Danone on a positive Catalyst Watch while moving Swiss packaged food giant Nestlé and French spirits maker Pernod Ricard to a negative Catalyst Watch.
In a recent note, J.P. Morgan’s European Staples team said it expects a “heightened level of volatility” this earnings season.
The analysts pointed to low valuations that could drive upside if results beat forecasts, but warned that earnings cuts are likely to be penalized.
The team noted that expectations for a softer third quarter had solidified through the period, yet momentum has deteriorated more sharply than expected across companies.
This trend suggests a weaker exit rate heading into 2026. They added that “deteriorating pricing” may surprise the downside and could indicate softer growth next year as consumers face pressure in a slower cost inflation environment.
Regionally, J.P. Morgan identified Latin America as a potential weak spot amid softening demand, while also cautioning about eroding demand trends in Europe.
The U.S. market remains more supportive in the near term, helped by tariff-led pricing and pre-holiday sell-in, though the analysts warned that 2026 demand remains clouded.
The brokerage said the European Staples sector continues to underperform year to date, trading at 18x 12-month forward price-to-earnings (PE), a 22% premium to the market and near two-decade lows excluding the global financial crisis.
Several stocks are currently valued between 12x and 16x PE, levels last seen in 2011-12, as investors question the sector’s long-term structural growth model.
J.P. Morgan said it continues to favor companies with “better visibility and lower multiples,” maintaining overweight ratings on Danone , Unilever, Kerry Group, Anheuser-Busch InBev, Heineken, Coca-Cola HBC, and Imperial Brands.