JPMorgan starts coverage on SMID Industirals, says it’s ’time to be bullish now’

Investing.com -- JPMorgan has begun coverage on five small and mid-cap (SMID) industrial stocks with a bullish view, arguing that safety is emerging as a central driver of growth.

Under the theme “Safety Unlocks Growth,” the bank highlights Carlisle Companies Incorporated (NYSE:CSL), Armstrong World Industries Inc (NYSE:AWI), and Allegion (NYSE:ALLE) with Overweight ratings, while CSW Industrials (NYSE:CSW) and Smith AO Corporation (NYSE:AOS) are rated Neutral.

“Time to be bullish now,” JPMorgan analyst Tomohiko Sano said in a note, emphasizing that SMID industrials offer “strategic agility that Large Caps often lack.”

The companies covered command top market positions, benefit from high replacement and remodeling (R&R) exposure, and have deep roots in the U.S. market.

Carlisle was named the top pick and added to JPMorgan’s Analyst Focus List, backed by “resilient re-roofing demand, pricing power, and optionality from underappreciated assets like Carlisle Weatherproofing Technologies (CWT).”

The company trades at a discount to peers despite offering high return on capital and stable cash flows, the analysts noted.

Armstrong is commended for its design-led ceiling systems and strong pricing power in institutional markets, while Allegion stands out with a growing software-linked revenue stream through its Zentra platform.

“Allegion balances mechanical strength with accelerating electronic growth,” Sano said.

In the note, the analyst underlines the evolving role of safety in driving valuation re-ratings.

Companies with low Total (EPA:TTEF) Recordable Incident Rates (TRIR) showed higher revenue and EBITDA growth, with JPMorgan calling safety “a thesis that drives competitive advantage and long-term value creation.”

The analysts also flagged favorable U.S. policy trends such as reshoring and tax cuts as structural tailwinds, but warned that economic volatility and tariffs remain risks.

Overall, the bank argues that SMID industrials are well-positioned for both macro defensiveness and strategic transformation, offering what it sees as compelling upside in the current market environment.