On Thursday, Citi increased the price target for GEA Group AG (G1A:GR) (OTC: GEAGY) to €45.30, up from €44.00, while maintaining a Buy rating on the stock. The adjustment reflects the stock's recovery from a 10% underperformance compared to the SXNP up to mid-June. This rebound is attributed to anticipation of a positive announcement at the company's October Capital Markets Day and a recent improvement in order intake.
The firm's analyst pointed out the defensive nature of GEA Group's stock, which has become more pronounced as early cyclical stocks have faced downward pressure due to election uncertainties and a weakening macroeconomic environment.
Despite these market conditions, the analyst reaffirmed a positive outlook on the stock, citing potential for higher targets and a free cash flow margin that could exceed 10% again. Additionally, the analyst noted that GEA's orders could benefit from interest rates that have likely reached their peak.
However, the analyst also tempered expectations for the second quarter, suggesting it might be premature to anticipate a beat and raise scenario. While there could be some upside to the Street's order expectations, sales and EBITDA are predicted to align with current projections.
The trading performance in the LPT division is expected to remain weak, with potential downside risks in trading for the SFT division, although other divisions may provide a counterbalance.
Finally, the analyst expects that the service issue within the SFT division will normalize over the second and third quarters, without relying on capital gains to bolster results as in previous quarters. This normalization is not fully accounted for in the second quarter's figures.
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