JPM Europe Equity Research | Today’s Morning Meeting

Europe First to Market 04 August 2026

Today’s Morning Meeting | Also Published Today | Key Changes | JPM Events | Upcoming Earnings

Today’s Morning Meeting Diageo (Celine Pannuti, CFA) (DGE LN, N)

CMD Preview: A Test of Diageo’s Fighting Spirit

Ahead of Diageo's much-anticipated Capital Markets Day & FY26 results on August 6th (view our preview here), we assess consensus in key areas of focus as new CEO Dave Lewis unveils his turnaround. Amid investor skepticism, the arduous task will be to convince on the growth path ahead around 1) scale of price repositioning and reconnecting to volumes growth, 2) length of turnaround in the USA which remains a key downside risk to consensus, and 3) articulating growth and investment in Beer and RTD which could be growth accretive. We are less concerned of deep and broad-based price cuts than the market, but caution rather on persistent volume weakness. 4) We also expect significant attention on further cost savings and organisational simplification to fund investment and improve execution. We see potentially $1bn in gross cost savings to support investments while avoiding a major margin reset. For FY27 we expect a soft guide on topline to be back in growth (vs. consensus +1.6%), though a flat organic EBIT guide would likely be welcome. On MT guide, we believe management should steer away from the traditional sales growth and margin targets which may disappoint. Overall, we leave our estimates unchanged as we believe EBIT should be underpinned by cost savings but we worry that of lack of excitement around top line recovery should limit opportunities for a rerating.

Rolls-Royce (David H Perry, CFA) (RR/ LN, OW)

Raising PT to 1,800p, for c20% upside over the next 17 months

Last week RR reported H1 26 meaningfully ahead of the BBG median consensus and significantly raised its 2026 guidance for EBITA and FCF. This was the ninth consecutive “beat and raise” from RR since the FY23 results. In our view, this was arguably the most impressive of the nine beats for two reasons. First, it is much harder to beat off a high base than a low base. Second, all three divisions significantly beat expectations and now have a higher earnings outlook. We increase our 2026-30E EPS by 19% / 14% / 13% / 13% / 14% (Table 2). We increase our SOTP-based Dec-27 PT by 11% to 1,800p, for c20% potential upside over the next 17 months.

IAG (Harry J Gowers) (IAG SM, OW)

Robust outlook but trimming estimates for higher fuel. Removing from AFL after outperformance despite continued ME volatility

We take our IAG EBIT estimates down by -6%/-5%/-4% post Q2 results due to lower capacity and higher fuel, and we now forecast 2026 EBIT at €4.54bn. Our key takeaways from the results were: (1) IAG is expecting to maintain similar RASK growth for the remainder of the year compared to Q2 with long-haul continuing to show solid demand. (2) Capacity guidance has been cut mainly due to a slow resumption in ME flying, however, this may continue to support pricing through the back half. (3) Despite ME-related volatility and a large increase in fuel costs, IAG is still expecting to be within its 12-15% EBIT margin range

EMEA Equity Research AC Europe Equity Research ( August 2026 JPMORGAN

this year, which would be the highest margins in our coverage, and lead to significant FCF generation. We remain OW, given in- tact fundamentals and continued robust long-haul demand which can lead to FCF generation significantly ahead of peers. However, IAG is up 7% YTD despite the continued Middle East-related volatility, and has outperformed the sector (ex-easyJet), but with our 2026 EBIT estimate currently c15% lower than what we forecasted at the beginning of the year. We therefore remove it from the Analyst Focus List. Our Dec-27 price target decreases by -4% to €5.75 (previously €6) due to lower estimates, with c15% upside potential to the last close. IAG is trading on 6.8x 2027E P/E on our estimates.

| Nordic Insurance (Nadia Claressa)

Quality without a catalyst - downgrading Tryg from N to UW and Sampo from OW to N

We reassess our stance on the two largest Nordic P&C insurers. While their defensive and stable qualities remain intact, we do not see sufficient…