On Tuesday, Citi maintained a positive stance on Sandvik AB (SAND:SS) (OTC: SDVKY) shares, raising the price target to SEK263 from SEK249 while reiterating a Buy rating. The firm anticipates the company to report its third-quarter results for 2024 on October 21 at 10:30 am UK time. Despite a more cautious outlook on volumes in the automotive and aerospace sectors, Citi believes Sandvik remains a strong contender compared to its peer SKF.
Sandvik's short-cycle business expectations are considered relatively supported, even after adjusting for previous pre-buy activities and comparing two-year-stacked peers' performance. The analyst pointed out that there are additional incremental savings since the second quarter, particularly within the Sandvik Machining Solutions (SMS) division, which is closely scrutinized for price and cost pressures.
In the mining sector, Sandvik's large orders in the Sandvik Mining and Rock Technology (SMR) division are not matching those of Epiroc, but expectations for in-line orders in mining are bolstered by substantial growth in the aftermarket. However, construction, along with the automotive and aerospace sectors, is anticipated to be weaker. The analyst suggests that the market's expectations for the Sandvik Rock Processing Solutions (SRP) orders might be overly optimistic.
Concluding the analysis, Citi expects Sandvik to experience relatively stable trading amidst concerns over short-cycle market volatility. This outlook reinforces Citi's Buy rating on the company's shares.
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