Citi Raises Price Target for GEA Group AG to €45.30 Amid Positive Outlook and Market Uncertainties
In a recent development, Citi has increased the price target for GEA Group AG to €45.30, up from €44.00, while maintaining a Buy rating on the stock. This adjustment comes as the stock has shown a strong recovery from a 10% underperformance compared to the SXNP up to mid-June. The rebound is attributed to anticipation of a positive announcement at the company's upcoming Capital Markets Day in October and a recent improvement in order intake.
The analyst at Citi highlighted the defensive nature of GEA Group's stock, which has become more prominent amidst election uncertainties and a weakening macroeconomic environment affecting early cyclical stocks. Despite these challenges, the analyst remains optimistic about the stock's potential, citing the possibility of higher targets and a free cash flow margin exceeding 10% once again. Moreover, the analyst believes that GEA's orders could benefit from interest rates stabilizing.
However, the analyst also cautioned against expecting a significant beat and raise scenario in the upcoming second quarter. While there may be some upside to order expectations, sales and EBITDA are expected to align with current projections. The LPT division's trading performance is anticipated to remain weak, with potential risks in the SFT division. Nonetheless, other divisions could provide a counterbalance.
Looking ahead, the analyst predicts that the service issue within the SFT division will normalize over the second and third quarters, without relying on capital gains for results. This normalization process is not fully reflected in the second quarter's figures.
In conclusion, Citi's positive outlook on GEA Group AG amidst challenging market conditions underscores the company's resilience and potential for growth. Investors should monitor developments closely and consider the long-term prospects of the stock in their investment decisions.