Concrete Gains: Europe's Construction Stocks Shine in 2025

European construction shares, led by companies like Holcim and Heidelberg, rose 21% in 2025, driven by themes like Germany's infrastructure stimulus, Ukraine's potential rebuilding, and AI growth. While optimism is high, questions about sustainability and a potential for price consolidation remain. The sector is also eyeing opportunities from increased defense spending.

European construction shares have surged by 21% in 2025, driven by thematic trades such as Germany's infrastructure investment, anticipated Ukrainian reconstruction efforts, and AI-driven growth. Key players like Holcim and Heidelberg have led this upward trajectory, boosted by optimism in cement pricing and infrastructure expenditure.

The sector's future momentum remains in question, with possible price consolidations on the horizon. The prospect of defense-linked orders, aligning with NATO's spending increases, presents an additional revenue stream, although sizeable projects may take years to manifest. "The German plan serves as a positive catalyst, while defense spending represents the cherry on the cake," stated Damien Mariette, senior fund manager at CPR Asset Management.

The construction sector's valuation, currently trading at roughly 17 times earnings, suggests that optimistic projections may be significantly priced in. Without tangible contract wins and a broad market recovery, further outperformance could be challenging, noted Andras Vig of Invesco. Meanwhile, firms like Saint-Gobain could capitalize on residential market recovery, despite potential pullbacks for heavy-side companies.

(With inputs from agencies.)