On Friday, Goldman Sachs adjusted its outlook on NIBE Industrier AB (NIBEB:SW) (OTC: NDRBF) shares, decreasing the price target to SEK38.00 from the previous SEK43.00. The firm has maintained its Sell rating on the stock.
The revision follows NIBE's first-quarter 2024 report, which revealed sales and earnings below expectations across all business segments. A significant 55% adjusted EBIT shortfall compared to Goldman Sachs' estimates was primarily due to a steep decline in European heat pump sales within the Climate Solutions division, with a 31.9% drop in organic sales growth (OSG).
The analyst anticipates continued challenges in the European heat pump market, citing overstocking in the distribution chain as a persistent issue. Expectations for the Stoves segment are also muted, with similar demand headwinds likely to affect OSG.
Consequently, Goldman Sachs has revised its full-year 2024 group OSG estimates to -11.5% from -8.2%, which is more pessimistic than the Visible Alpha Consensus Data at -9.0%.
Goldman Sachs also foresees profitability pressures due to volume declines and has incorporated higher-than-anticipated charges for NIBE's cost action plan, now expected to be SEK1,095 million compared to the previous SEK900 million.
The expected savings have also been increased to a SEK750 million run-rate from fiscal year 2025, up from SEK600 million. With these adjustments, the firm's forecast for the company's full-year 2024 adjusted EBIT is SEK4,141 million with a margin of 9.6%, down from the prior estimate of 12.7%, positioning them about 16% below the consensus.
Looking further ahead, Goldman Sachs has also lowered its earnings forecasts for fiscal years 2025 and 2026 by 18% and 17%, respectively. The projected margins for these years are now 12.1% and 13.0%, compared to the previous 14.0% and 14.9%.
The firm expects the net debt to EBITDA ratio to rise from 2.0x in fiscal year 2023 to 3.5x in fiscal year 2024 estimates, with a return on invested capital (ROIC) for fiscal year 2025 projected at just 7.8%. These figures have led Goldman Sachs to reiterate its Sell stance with the new lowered price target.
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