Deutsche Bank's Nicole DeBlase on 2026 industrials outlook

Core Viewpoint - Investors are shifting focus from technology to industrial sectors, leading to record levels in the industrial space [1] Industrial Sector Insights - The industrial sector is experiencing a positive shift, driven by stabilizing tariff policies, potential Federal Reserve interest rate cuts, and a hope for recovery in the ISM index, which has been in contraction for three years [3][4] - Recent performance in the industrial sector has been bolstered by companies linked to AI, with strong backlogs indicating continued demand [5][6] Company-Specific Highlights - Eaton is identified as a top pick for 2026, with approximately 20% exposure to data centers, reflecting strong growth potential [6] - GE Vernova is also favored, with significant order bookings extending into 2029 and beyond, providing visibility into future earnings growth [7][10] - The upside potential for GE Vernova is projected to be in the high single digits to low double digits through 2028, making it an attractive investment [8] Earnings and Valuation Considerations - The stock performance of GE Vernova has been influenced by robust gas turbine demand and visibility into gas power services, which are expected to drive earnings growth into the 2030s [10] - The recurring revenue from long-term service agreements associated with gas turbines enhances the investment case for GE Vernova [11][12] Underappreciated Companies - Dober Corporation, Illinois Toolworks, and Ingersoll Rand are highlighted as underappreciated companies with significant upside potential, potentially exceeding 20% in earnings and multiple rerating if a short cycle recovery occurs [13]