On Friday, SKF AB (SKFB:SS) (OTC: OTC:SKFRY) had its price target increased by CFRA from SEK195.00 to SEK232.00, while the Hold rating on the stock was maintained. The adjustment comes after the company reported a Q1 2024 adjusted EPS of SEK4.83, which is a 1% increase year-over-year and surpasses the consensus forecast of SEK4.42.
The firm's analyst noted that the new price target is based on a 13x price-to-earnings (P/E) ratio to the anticipated 2025 earnings per share (EPS), which aligns with SKF's ten-year average forward P/E. The company's stronger-than-expected adjusted operating margin of 13.4%, a year-over-year improvement of 30 basis points, was highlighted as a contributing factor, attributed to an advantageous price and product mix.
Despite the earnings beat, SKF's net cash flow saw a 35% year-over-year decline, impacted by an increase in accounts receivable. On the other hand, the company's balance sheet showed signs of strength, with a decrease in the net debt/equity ratio to 26.6% from the end-2023 level of 29.5%.
The management of SKF has maintained its 2024 outlook, anticipating a low-single-digit decline in sales. Following the assumption of improved margins, the CFRA analyst has revised the company's 2024 EPS forecast upwards to SEK16.21 from SEK15.00 and the 2025 EPS estimate to SEK17.85 from SEK16.58. Despite the positive adjustments to earnings and margin, the analyst pointed out that SKF's revenue and cash flow are weaker compared to the previous year.
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