On Tuesday, Geberit AG shares (SIX:GEBN:SW) (OTC: GBERY) received an upgrade from a Sell to a Hold rating by CFRA. The firm also raised the stock price target for the Swiss plumbing and sanitary products manufacturer from CHF440.00 to CHF550.00.
The adjustment is based on an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 20.5 times, which aligns with Geberit's five-year average.
The upgrade follows Geberit's first-quarter results for 2024, which showed net sales of CHF837 million, a 6.2% decrease from the previous year but slightly higher than the consensus estimate of CHF827 million. The decline was attributed to a drop in demand and volumes, as well as adverse currency effects. Moreover, the company's EBITDA decreased by 7% to CHF275 million.
The broader building construction industry is forecasted to contract in 2024, with a significant downturn due to a decrease in European building construction. This is largely due to a 15% fall in building permits in Europe in 2023, which indicates a reduction in new building activities.
Despite these challenging market conditions, CFRA anticipates a potential reduction in interest rates in the second half of 2024.
CFRA also noted Geberit's strong pricing power and a recent announcement of a share buyback program worth up to CHF300 million as factors that could contribute to stabilizing the company's stock price. Yet, the firm still expects Geberit to face a decline in revenue, particularly in the German and Swedish markets. The upgrade to a Hold rating reflects a more neutral stance on the stock's near-term prospects.
InvestingPro Insights
Following the recent upgrade of Geberit AG by CFRA, it's worth noting that the company has a history of financial stability and shareholder returns. According to InvestingPro data, Geberit boasts a market capitalization of $20.06 billion and a Price/Earnings (P/E) ratio of 29.58, which adjusts to 27.7 for the last twelve months as of Q4 2023.
Despite a revenue decline of 9.08% in the same period, the company has an impressive gross profit margin of 71.25%. This robust margin reflects Geberit's strong pricing power, which CFRA highlighted as a positive factor.
InvestingPro Tips further reveal that Geberit has been consistent with its shareholder returns, raising its dividend for 13 consecutive years and maintaining dividend payments for 25 consecutive years. The company's liquidity is also noteworthy, with liquid assets surpassing short-term obligations. Moreover, Geberit's cash flows can sufficiently cover interest payments, which is a reassuring sign for investors considering the potential downturn in the broader building construction industry.
For investors seeking more detailed analysis and additional InvestingPro Tips, they can explore further insights on Geberit's financial health and stock performance by visiting https://www.investing.com/pro/GBERY. There are 12 more tips available, which could provide a deeper understanding of the company's prospects. Plus, by using the coupon code PRONEWS24, investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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