On Tuesday, Goldman Sachs issued a downgrade for Alstom (EPA:ALSO) SA (ALO:FP) (OTC: ALSMY) stock from 'Neutral' to 'Sell', adjusting the price target to €18.50, up from the previous €18.00. The downgrade comes despite Alstom's impressive 102.64% return over the past year and recent momentum, with shares up nearly 30% in the last six months.
Stifel analysts cited concerns over the company's ability to sustain its strong performance from 2024 into the following year. They noted that the growth in rail capital expenditure (capex) is expected to be below the sector average, while Alstom's share price appears to have already factored in the achievement of company targets. InvestingPro analysis reveals 8 additional key insights about Alstom's performance and prospects.
The analysts pointed out that Alstom's stock is trading at a higher enterprise value to invested capital (EV/IC) relative to return on invested capital (ROIC) over weighted average cost of capital (WACC) compared to its rail industry peers. With current gross profit margins of just 12.67% and no dividend payments to shareholders, these concerns appear warranted.
The new 12-month price target of €18.50, which marks an increase from the previous target, is based on a rolled-over evaluation to a 12-month 2026 estimate using Goldman Sachs' sector-relative rolling EV/IC to ROIC/WACC methodology. According to InvestingPro's Fair Value analysis, the stock currently shows potential upside from current levels.
Despite the price target increase, the analysts anticipate a roughly 17% downside for Alstom's stock compared to an average sector upside of 12%. They also project that Alstom's orders will fall short by 8% and 17% over the next two fiscal years.
While the company maintains moderate debt levels and generated $461 million in levered free cash flow over the last twelve months, analysts estimate that the company's free cash flow (FCF) for fiscal years 2024/25 to 2026/27 will cumulatively be around 9% below expectations. These projections reflect Goldman Sachs' cautious outlook on Alstom's financial performance in the medium term. Get the complete financial health analysis and detailed Fair Value calculations for Alstom and 1,400+ other stocks with InvestingPro.
In other recent news, Alstom reported a strong performance for the first half of fiscal year 2024-2025, despite supply chain disruptions. The company's order intake stood at €10.9 billion, accompanied by a 5.6% increase in organic sales. The adjusted EBIT margin reached 5.9%, with a full-year target of 6.5%.
Although the free cash flow was negative at €138 million, Alstom anticipates a positive turnaround in the second half of the year, aiming for a full-year target between €300 million and €500 million. The company's net financial debt saw a reduction to €927 million, with a confirmed full-year outlook projecting sustained growth and operational efficiency.
Noteworthy orders for the company include a €3.6 billion project in Cologne, a €650 million signaling project in Australia, and an €850 million high-speed train order in France. Despite these accomplishments, supply chain issues have led to delays in 60% to 70% of projects, impacting production.
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