On Thursday, Citi revised its price target for Assa Abloy (OTC:ASAZY) AB (ASSAB:SS) (OTC: ASAZY), a leading global lock manufacturer, reducing it from SEK285.00 to SEK280.00, while keeping a Sell rating on the stock. The adjustment follows Assa Abloy's reported earnings, which showed a slight miss in the second quarter revenue despite stronger than anticipated performance in the U.S. residential market, with high single-digit growth in their HHI division.
The firm's analysis suggests that the current momentum in the U.S. residential sector, which Assa Abloy has been experiencing, is likely to diminish by 2025 due to declining housing starts. This anticipated decrease in the housing market could render any strength seen in 2024 as not indicative of future performance. Consequently, Citi believes that the consensus growth expectations for the Americas are overly optimistic.
In addition to the forecast for the U.S. residential market, Citi also expressed concerns about near-term projections for Assa Abloy's Global Technologies division. The firm points out that the expectations seem too high given the slow underlying momentum and the challenging year-over-year comparisons that lie ahead.
While Citi has kept its 2024 earnings per share (EPS) estimates for Assa Abloy unchanged, it has reduced its EPS forecasts for the years 2025 and 2026 by 2%.
This revision in EPS expectations has led to the lowered price target. Despite recognizing Assa Abloy as a defensive and high-quality company, Citi concludes that the market's expectations for the coming year may not be met due to the tough conditions in the end-markets.
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