European midcaps: Where Jefferies sees upside into H2

European midcaps present promising opportunities for investors in the second half of 2026, according to Jefferies. This optimism stems from stronger order intake, improving market momentum, and better earnings visibility. Recent second-quarter earnings surprises have led to significant estimate hikes across the firm's midcap portfolio.

Among the companies highlighted, Redcare Pharmacy has been upgraded to a preferred pick at its current valuation level. Bilfinger and Inficon remain top selections for the H2 period. Inficon has demonstrated a notable recovery in operational performance this year, overcoming challenges such as tariff uncertainty, foreign-exchange headwinds, and semiconductor weakness.

Another standout is Systemair, which has delivered strong results with an adjusted EBIT rising 13% year-on-year and beating consensus by 4% in its fiscal first quarter. The company's growth outlook is further bolstered by its exposure to data-center cooling and the potential impact of AI-related spending.

Volex has also caught Jefferies' attention, earning a Buy rating following its outperformance of expectations and a 4% raise in full-year guidance only four months into the financial year. The company's forecasts have been extended through fiscal 2029, driven by robust growth and earnings trajectories.

Acerinox is another name on Jefferies' list, with its price target raised to €22 based on a more U.S.-focused earnings mix, capacity expansion, and improving conditions in Europe. Everplay offers a unique upside through its valuation, as strong engagement around upcoming releases is expected to drive a second-half earnings ramp.

Around 80% of the company's fiscal 2026 EBITDA is forecasted for the second half, and the shares trade at a price-to-EBITDA multiple of 6.5, significantly below the historical average in the mid-teens range.

Jefferies has also become more selective in its approach, downgrading DocMorris to Hold after a more than 80% share-price increase this year. Additionally, Nagarro was also cut to Hold, anticipating the successful completion of Persistent's €81-per-share takeover offer.