The second quarter of 2025 saw a wave of uncertainty sweep through the markets and the global economy after President Donald Trump announced sweeping reciprocal tariffs on April 2. Against this backdrop, Morningstar analysts reassessed the moat ratings of a number of companies.
Economic moat ratings, which reflect a company’s durable competitive advantages, are at the heart of Morningstar’s stock-picking methodology. Companies with the strongest competitive advantages that are expected to last at least 20 years are assigned a wide moat rating. Those seen as able to fend off competition for 10-20 years receive a narrow moat. Companies that analysts do not believe possess any competitive advantages are not assigned a moat rating. When combined with low valuations, stocks with moats have historically had a greater chance of outperforming over the long term.
With their multidecade focus, moat ratings are not reassigned often. But changes within a company or the competitive landscape can lead Morningstar’s equity analysts to adjust ratings. As Allen Good, who heads Morningstar’s moat ratings committee, explains: “We take a long-term perspective when assigning moat ratings, so they are unlikely to change frequently. News events may create volatility in share prices, but that does not mean a company’s competitive position has changed meaningfully. However, analysts are continually testing their assumptions and evaluating a company’s advantages. When an analyst determines something fundamental has changed to affect a company’s longer-term outlook, a moat rating change may be necessary.”
Each quarter, we screen Europe-listed stocks covered by Morningstar analysts for any changes in moat ratings. In the second quarter of 2025, out of the 307 stocks on the coverage list, five companies saw changes in their moat ratings. Five stocks were upgraded and none were downgraded.
Here’s a closer look at Q2 2025’s moat rating changes:
Economic Moat Ratings Across Morningstar’s Europe Coverage List
Following the second quarter’s changes, of the 307 Europe-listed stocks covered by Morningstar, 81 have wide moats, 113 have narrow moats, and 113 have no moat. In the year to date, 37% of the stocks had no moat, 37% had narrow moats, and 26% had wide moats.
How Economic Moat Ratings Work
Morningstar’s economic moat rating is a key element in evaluating a company’s long-term competitive advantage and its ability to generate excess returns on capital over a period of many years.
Morningstar equity analysts determine a company’s economic moat by examining how well it can maintain or grow its market position. A moat helps protect a company’s profits from rivals. Some businesses are better equipped to preserve these advantages over time, while others operate in more competitive or vulnerable industries.
A company with a strong and enduring competitive advantage can often command better pricing, retain loyal customers, and operate more efficiently. These qualities support long-term value creation, which is especially important when evaluating a stock’s potential for superior long-term returns.
Morningstar identifies five primary sources that contribute to an economic moat:
- Switching Costs: Barriers that discourage customers from changing providers due to time, expense, or inconvenience.
- Network Effects: The increasing value of a product or service as more people use it, reinforcing its dominance.
- Intangible Assets: Patents, regulatory licenses, and brand recognition that give a company a distinct edge.
- Cost Advantage: The ability to deliver goods or services at a lower cost than competitors, leading to greater margins or price competitiveness.
- Efficient Scale: Operating in markets with limited competition due to natural or structural constraints.
Here’s a closer look at the stocks with moat rating changes in the second quarter of 2025.
Metrics for Stocks With Economic Moat Changes
ASM International ASM
- Morningstar Rating: ★★★★
- Sector: Technology
- Industry: Semiconductor Equipment & Materials
“We give ASM International a wide moat rating supported by intangible assets and switching costs. ASM’s wide moat stems from its design expertise, entrenchment into long-term customer technology road maps, and the critical nature of semiconductor equipment. We expect that ASM will, more likely than not, earn returns on invested capital above its cost of capital for the next 20 years. The semiconductor road map is set for the next 15 years, and ASM’s deposition technology will be a great beneficiary of 3D transistor structures.”
- Javier Correonero, equity analyst
Be Semiconductor Industries BESI
- Morningstar Rating: ★★★
- Sector: Technology
- Industry: Semiconductor Equipment & Materials
“We give Besi a wide moat rating supported by intangible assets and switching costs. Besi is a one-stop shop for equipment required in the advanced packaging of semiconductors, a key enabler of improved computing performance, energy efficiency, and heat dissipation. Besi has achieved this position thanks to decades of research and development investment and know-how while remaining highly focused. We expect Besi will, more likely than not, earn returns on invested capital above its cost of capital for the next 20 years.”
- Javier Correonero, equity analyst
Epiroc EPI A
- Morningstar Rating: ★★
- Sector: Industrials
- Industry: Farm & Heavy Construction Machinery
“We assign Epiroc a wide moat rating resulting from intangible assets and high switching costs. Epiroc’s moat stems from its brand reputation for reliable niche mining equipment used in harsh underground conditions and record of product innovation through its proximity to customers via its strong aftermarket presence, which makes it difficult for competitors to emerge. Its capital-light business model, where 75% of product costs are outsourced, and flexible manufacturing have allowed Epiroc to focus on product innovation and deliver high-margin aftermarket services to maintain the uptime of customers’ equipment and to earn returns on invested capital above 20% irrespective of cyclical mining capital expenditure.”
- Matthew Donen, director
Sandvik SAND
- Morningstar Rating: ★★★
- Sector: Industrials
- Industry: Specialty Industrial Machinery
“We award Sandvik a wide economic moat primarily based on its strong market position in niche applications with its mining and rock technology segment. At the same time, we also see traces of an economic moat in its other divisions. Recent divestments of no-moat businesses have raised the segment’s profitability closer in line with peers and contributed to Sandvik consistently earning returns on invested capital in the mid to high teens, well above its weighted average cost of capital of 8%.”
- Matthew Donen, director
Siemens Energy ENR
- Morningstar Rating: ★★
- Sector: Industrials
- Industry: Specialty Industrial Machinery
“We upgrade the economic moat rating of Siemens Energy from none to narrow on the secular trends boosting its two largest businesses, growing share of service in the gas services business, and the turnaround of Siemens Gamesa.”
- Tancrede Fulop, senior equity analyst
Read More on Moat Ratings and Morningstar’s Stock Investing Methodology
- Read Morningstar’s Guide to Stock Investing to learn how our approach to investing can inform your stock-picking process.
- More on the economic moat rating can be found here.
- Here’s how to measure a company’s economic advantage.
- Find a list of wide-moat stocks here.
- Moaty stocks that Morningstar analysts think are cheap.
- The best of both worlds: undervalued wide-moat stocks.
- Use the Morningstar Investor screener to build a shortlist of financial-services stocks to research and watch.
