On Tuesday, Deutsche Bank adjusted its price target for Knorr-Bremse AG (KBX:GR) shares, a leading manufacturer of braking systems, from EUR74.00 to EUR75.00, while keeping a Hold rating on the stock. The revision comes ahead of the company's third-quarter earnings report scheduled for October 31st.
The bank anticipates that Knorr-Bremse will announce orders amounting to EUR1,974 million, a slight organic increase year-over-year, and revenues of about EUR1,932 million, also up around 1% organically.
EBIT is expected to reach EUR234 million, translating to a margin of 12.1%, which would be an improvement of 60 basis points compared to the same period last year.
Free cash flow (FCF) is forecasted at EUR153 million, consistent with the previous quarter but showing a decrease from the EUR230 million reported in the third quarter of 2023.
The analyst expects that the company's management will likely raise its full-year 2024 revenue guidance due to the acquisition of Alstom (EPA:ALSO)'s US signalling business, anticipated to contribute an additional EUR100 million for four months. However, the margin outlook is predicted to remain unchanged.
By segment, the Rail Vehicle Systems (RVS) division is poised to benefit from steady rail demand and progress in margins throughout the year. Conversely, the Commercial Vehicle Systems (CVS) division is expected to face challenges, including a double-digit decline in truck production in the second half of the year in Europe and North America, which may result in margins slightly falling below 10% in both the third and fourth quarters.
The modest increase in the target price to EUR75 reflects the bank's valuation grounds and suggests a stable but cautious outlook on Knorr-Bremse's financial performance.
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