Investing.com -- Shares of Saab AB (ST:SAABb) jumped on Wednesday in its earnings report, which posted a margin beat driven primarily by its Surveillance division.
At 7:30 am (1130 GMT), Saab AB was trading 5.6% higher at SEK 232.3.
Analysts at UBS said that the results exceeded expectations, with the company posting a 5% beat at the EBIT line, due to strong margins in the Surveillance segment, which posted an EBIT margin of 9.8%, well above the consensus estimate of 7.9%.
This was largely due to the completion of several key projects during the quarter.
The EBIT for Dynamics missed expectations by about 20%, UBS flagged that management acknowledged phasing issues related to deliveries in Ground Combat, indicating potential challenges that could reverse the trend of stronger results seen in previous quarters.
Saab also posted an operational cash flow of SEK 3,188 million, largely due to prepayments. Following these results, management stated they are targeting the upper end of their sales growth guidance range of 15-20% for FY24, which aligns with Citi’s forecast of 20%.
This aligns with the consensus. Furthermore, the company expect EBIT growth to outpace sales growth, reinforcing a positive outlook for the company.
Citi Research flagged Saab’s strong performance, reporting an order intake of SEK 21,173 million, which exceeded consensus estimates by 18%.
This intake results in a 1.9x book-to-bill ratio, reflecting notable growth in the Dynamics division.
80% of these orders were international, indicating that Saab’s backlog is less reliant on any single government, which may reduce risks related to order fluctuations.
However, sales totaled SEK 13,546 million, falling short of expectations with a 1% decline compared to consensus estimates.
The company reported an EBIT of SEK 1,187 million, a 6% increase over the compiled consensus, resulting in a group margin of 8%.
However, Citi also flagged several risks to their investment case, including potential reductions in defense budgets, challenges in achieving high-end orders, and ongoing supply chain constraints.
Despite these risks, Citi noted upside potential, particularly if Saab can secure large high-end orders or improve its cash conversion rates beyond current expectations.