Jefferies has moved Rexel (EPA:RXL) from a hold to a buy recommendation and lifted its one-year price objective to €43.10 from €32. The new target implies roughly 27% upside relative to the stock's previous close of €33.90 and stimulated a positive reaction in the share price on Thursday.
In its research note, Jefferies said it sees an "attractive setup for Rexel into 2026 with significant price tailwinds, recovery in select industrial & construction markets as well as another year of strong growth in data centers," and added that group guidance "look(s) conservative."
The brokerage increased its forecasts by 3-5% and now models revenue rising from €19.41 billion in 2025 to €20.15 billion in 2026 and €21.06 billion in 2027. Jefferies projects EBITA to climb from €1.16 billion in 2025 to €1.28 billion in 2026 and €1.41 billion in 2027, with earnings per share at €2.45 in 2026 and €3.02 in 2027.
Valuation assumptions behind the new target are anchored on a 14x P/E multiple applied to 2027 estimates, up from the 12x multiple used previously. Jefferies noted that the stock is trading at a substantially larger discount than its historical norms versus key peers such as Wesco and other global electrical distributors.
Pricing is highlighted as a principal earnings driver. Jefferies pointed to the distribution model's sensitivity to inflation, saying there is "very high drop through to margins of additional revenues generated from price." The broker singled out rising copper prices, pricing in industrial automation, and indirect effects stemming from developments in the Middle East as contributors to the pricing environment.
The note underscores exposure to cyclical improvements in construction and industrial end markets, citing improving indicators in the United States and China and a pickup in residential permit trends across parts of Europe. Jefferies quantified end-market exposure, saying roughly 30% of U.S. revenue exposure is linked to industrial activity while about 40% of European exposure is tied to residential markets.
Data centres are identified as a high-growth segment for the group. Jefferies estimates data centres represent about 13% of U.S. sales and 5% of consolidated group sales. The business is approaching €1 billion in annual revenue after expanding by 50% in the prior year, and management is guiding to another year of "20%+" growth.
Margin expansion is a central theme in Jefferies' outlook. Current margin levels are near 6%, with a mid-term aspiration above 7%. The broker expects operating leverage, ongoing pricing, restructuring actions in the U.K. and Germany, and productivity improvements from digital and artificial intelligence initiatives to support margin progression. Jefferies quantified productivity potential from these initiatives in the range of 20-30%.
On a valuation basis, Jefferies observed that "RXL can deliver DD EPS CAGR mid-term trading on 12x P/E 2027e only," while also noting that consensus earnings remain below prior peak levels.
Implications: The upgrade reflects Jefferies' view that pricing dynamics, recovery in certain end markets and continued rapid expansion in data centre demand underpin a path to higher revenues, improved EBITA and rising margins through 2027, supporting a higher multiple and upward revision to the price target.