Investing.com -- GEA Group Aktiengesellschaft (ETR:G1AG) rose on Friday after the company raised its earnings guidance for fiscal year 2024, signaling a stronger-than-expected financial performance.
The German engineering firm, which specializes in process technology for industries such as food, chemicals, and pharmaceuticals, cited strong results for the first nine months of 2024, with particularly strong momentum in the third quarter.
As a result, GEA now forecasts an EBITDA margin, before restructuring expenses, of between 15.4% and 15.6% for the full year, up from its previous guidance of 14.9% to 15.2%.
“At GEA's CMD last week we noted the rather bullish margin targets (reported EBITDA margin to rise to 17-19% by 2030 from currently c.14.2%) that were way above sell-side expectations (and we believe sell-side is still sceptical today),” said analysts at RBC (TSX:RY) Capital Markets in a note.
This marks the second time this year that GEA has raised its earnings outlook, driven by consistent growth in profitability and cost efficiency.
The company's organic revenue growth outlook remains steady at 2.0% to 4.0%, and its return on capital employed is expected to range between 32% and 35%.
This higher profitability, particularly in the base business, has been a key driver of investor optimism, reflected in the stock’s rise following the announcement.
“Order intake was particularly encouraging, driven by strong base business. We will implement our recently published Mission 30 strategy step by step, thereby further increasing the group's profitability,” said GEA’s CEO, Stefan Klebert.
Jefferies maintains an optimistic view on the raised guidance, but also flags potential downside risks. These include weakness in GEA’s dairy business, potential challenges in management's ability to continue the business turnaround, difficulty in raising prices, and dealing with inflationary cost pressures.