On Friday, Barclays (LON:BARC) initiated coverage on Assa Abloy (OTC:ASAZY) AB (ASSAB:SS) (OTC: ASAZY) stock with an Underweight rating and set a price target of SEK274.00. The firm expressed caution regarding the speed of recovery in construction markets, which could impact demand for the company's products.
According to Barclays, their outlook differs significantly from the market consensus, particularly in terms of revenue expectations and margin recovery. They anticipate that Assa Abloy's revenues for 2025 and 2026 will be 5-6% lower than the consensus estimates.
The firm also highlighted concerns about margin progression due to a combination of a lower volume outlook and a more extended period required for margin recovery in Assa Abloy's HHI division.
Barclays' projections for the company's adjusted EBIT margin are 30-40 basis points below the consensus for 2025 and 2026, leading to an overall adjusted EBIT estimate that is 7-8% lower than the market consensus.
Barclays' position reflects a more conservative stance on Assa Abloy's financial performance in the coming years. The firm's analysis suggests that the company may face challenges that could affect its profitability and market position.
As the market processes this new coverage and price target from Barclays, investors will likely weigh the implications for Assa Abloy's stock performance in the context of the broader construction and home improvement sectors.
In other recent news, Assa Abloy has seen a series of adjustments in stock targets from major analyst firms. Deutsche Bank (ETR:DBKGn) increased its price target on Assa Abloy shares to SEK290 from SEK285, maintaining a Hold rating. The bank's decision follows the company's second-quarter results, which showed a slight miss in volume, counterbalanced by a positive pricing impact. The company's profit margins were slightly higher than anticipated at 16.0%.
Meanwhile, Citi revised its price target for Assa Abloy, reducing it from SEK285.00 to SEK280.00, while maintaining a Sell rating. This decision followed Assa Abloy's reported earnings, which showed a slight miss in second-quarter revenue, despite stronger performance in the U.S. residential market. Citi's analysis suggests that the current momentum in the U.S. residential sector is likely to diminish by 2025.
On another note, Deutsche Bank raised concerns about Assa Abloy's recent mergers and acquisitions strategy, focusing on lower-value-added segments, which could dilute the company's exposure to higher-growth segments.
Finally, Jefferies also adjusted its price target for Assa Abloy shares, setting the new target at SEK 292.00, increased from SEK 275.00, while retaining a Hold rating. These recent developments highlight ongoing analysis and adjustments made by the firms in their outlook for Assa Abloy.
InvestingPro Insights
For investors seeking a deeper understanding of Assa Abloy's financial health, InvestingPro offers real-time data and expert analysis. Assa Abloy has been a consistent dividend payer, maintaining dividend payments for 29 consecutive years and raising its dividend for 14 consecutive years, showcasing its commitment to shareholder returns. Despite some analysts revising their earnings downwards for the upcoming period, the company has been profitable over the last twelve months as of Q1 2023.
InvestingPro data reveals that Assa Abloy has a market capitalization of $35.25 billion and trades at a P/E ratio of 24.62, which is considered high relative to near-term earnings growth. The company's revenue growth for the last twelve months stands at 11.72%, indicating a solid top-line expansion. Additionally, Assa Abloy's gross profit margin during the same period is at a healthy 40.85%, reflecting efficient cost management.
It's worth noting that Assa Abloy is a prominent player in the Building Products industry and operates with a moderate level of debt, which may be of interest to investors considering the company's financial stability. For those interested in further insights and additional InvestingPro Tips, the platform lists more tips that can help investors make informed decisions. Visit InvestingPro for a comprehensive analysis of Assa Abloy's financials and market position.
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