Investing.com — UBS downgraded Saint Gobain (EPA 🙂 (EPA 🙂) to Neutral from Buy in a note on Thursday, citing limited upside potential following strong performance in 2024 and the stock’s rerating.
“With shares trading at 12-13x P/E, we believe there could still be limited, but modest, rerating potential,” UBS analysts wrote.
The downgrade comes amid concerns about rising interest rates, which could negatively impact growth expectations in residential end markets.
UBS’s operating income forecast is slightly below consensus at -1%, while earnings per share are forecast to be -5% below consensus.
The bank’s note highlights the challenges in maintaining the price/cost dynamic that supported margins in 2024.
“2024 was characterized by a year in which volumes disappointed due to weakness in end markets, but margins (expected to increase from a record 11.0% in 2023) made up for it,” UBS said. .
While they estimate a modest positive price/cost impact of €50 million in 2025, analysts warn that it will be more difficult to achieve gross margin gains similar to those of recent years.
With projected organic EBIT growth of +3% and total growth, including M&A and currencies, of +7%, UBS expects total EBIT to reach €5,616 million, 1% below consensus.
Looking ahead, the upcoming Saint Gobain Capital Markets Day (CMD) in the second half of the year could serve as a catalyst, especially if margin guidance is increased.
“We believe that a realistic target is 11 to 13%, taking into account that some categories are at very high levels compared to historical standards,” UBS commented. They also point to possible changes to the portfolio, including reports of a sale of the auto glass business, although this has recently been denied.
UBS has adjusted its price target to €92 per share, slightly above €91, based on a discounted cash flow valuation using a WACC of 8% and a long-term after-tax ROIC of 10.5%.