On Monday, Goldman Sachs increased its price target on shares of Legrand SA (EPA:LEGD) (LR:FP) (OTC: LGRDY) to EUR112 from EUR110, while keeping a Buy rating on the stock.
The adjustment follows Legrand's second-quarter results for 2024, which surpassed expectations, particularly in data center growth and non-residential market performance.
Legrand's recent financial outcomes revealed a significant growth that outperformed Goldman Sachs' projections for the second quarter of 2024. The company's data center segment, representing about 15% of group sales in 2023, showed an acceleration in growth.
This sector is anticipated to see a compound annual growth rate (CAGR) of approximately 24% from 2023 to 2027, which is the highest among all capital goods end markets.
In response to these results, Goldman Sachs has slightly raised its earnings before interest and taxes (EBIT) estimates for Legrand for the fiscal years 2024 to 2026. The firm's forecasts are now approximately 2% and 6% higher than the Visible Alpha Consensus for fiscal years 2025 and 2026, respectively.
The analysis also points to a stable sequential performance in the U.S. non-residential sector and positive indicators in the residential sector as interest rates begin to decrease.
Based on these trends, Goldman Sachs predicts that Legrand could achieve an organic sales growth (OSG) compound annual growth rate of around 5.5% from fiscal year 2025 to 2028, a notable increase compared to the sub-3% OSG CAGR experienced over the past two decades.
Additionally, insights from a virtual CFO roadshow hosted after Legrand's second-quarter results were shared, providing further confidence in the company's financial trajectory and market positioning.
In other recent news, Legrand SA, a global specialist in electrical and digital building infrastructures, experienced a slight reduction in its price target from EUR104.00 to EUR103.00 by Jefferies. The firm, however, maintained a Hold rating on the stock.
This adjustment came after an update to the Low Voltage proxy database, which showed a significant increase in European product volumes, particularly in France and Italy, counterbalanced by weaker performance in Germany and the United Kingdom.
April witnessed a strong 6% year-over-year volume growth, contrasting with a 3% decline in the first quarter, suggesting that market consensus for Legrand's organic growth may be underestimated.
Despite these positive signs in Europe, Jefferies adjusted its EBITA forecast for the year 2024 downward by 1%, influencing the new price target for Legrand's shares. These are among the recent developments for the company.
InvestingPro Insights
The recent upgrade by Goldman Sachs on Legrand SA (OTC: LGRDY) aligns with several positive indicators reflected in the latest InvestingPro data. The company's market capitalization stands robust at $26.09 billion, supported by a healthy P/E ratio of 22.33 and an even more attractive adjusted P/E ratio for the last twelve months as of Q2 2024 at 22.09. These valuations are underpinned by a solid gross profit margin of 52.15%, showcasing the company's efficiency in managing its cost of goods sold.
InvestingPro Tips highlight Legrand's commitment to returning value to shareholders, with a history of raising its dividend for 4 consecutive years and maintaining dividend payments for 19 consecutive years. The dividend yield as of mid-2024 stands at 1.6%, with a strong dividend growth of 13.73% over the last twelve months leading up to Q2 2024. This dedication to shareholder returns is complemented by the company's liquidity position, where liquid assets surpass short-term obligations, and the operation with a moderate level of debt, signaling financial stability and prudent capital management.
For investors seeking deeper insights, there are additional InvestingPro Tips available on the platform that may provide further guidance on Legrand's financial health and future prospects. The company's next earnings date is set for November 7, 2024, which will be a key event for investors to watch.
With these financial metrics and strategic insights, Legrand SA appears to be on a strong footing as it continues to capitalize on growth opportunities in the data center and non-residential markets. Investors can explore the full suite of InvestingPro Tips for Legrand by visiting https://www.investing.com/pro/LGRDY.
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