On Monday, Barclays (LON:BARC) reaffirmed its positive stance on Trelleborg AB (LON:0NL3) (TRELB:SS) (OTC: TBABF) stock, maintaining an Overweight rating and a price target of SEK460.00. The firm's analyst, provided insights into the company's prospects amidst a challenging economic environment.
Barclays anticipates that short-cycle activity will likely continue to face headwinds in the fourth quarter of 2024, despite some encouraging signs from the United States following the elections and stimulus measures in China.
However, the expectation is that conditions could begin to stabilize as 2025 approaches, particularly in the U.S., potentially boosted by pre-buying ahead of anticipated tariffs.
Trelleborg's medium-term outlook remains appealing to Barclays due to several factors. The company is recognized for its solid organic growth potential in key markets, opportunities for inorganic growth supported by its financial position, and the possibility of margin improvement through synergies from acquisitions. Additionally, Trelleborg's share buyback program is expected to be underpinned by its strong cash flows.
The analyst's preference for Trelleborg over its peer SKF is based on Trelleborg's slightly greater exposure to the U.S. market and comparatively lower tariff risks. The Overweight rating has been sustained with an unchanged price target of SEK460, which is based on a constant 15.5x adjusted EBITA target multiple for the year 2025. Minor adjustments, ranging from approximately 0 to 1%, have been made to the sales and adjusted EBITA forecasts for the years 2024 through 2026.
Barclays' assessment reflects confidence in Trelleborg's ability to navigate the current economic landscape and capitalize on its strategic advantages. The firm's analysis points to a steady trajectory for Trelleborg, underlining the company's potential for sustained growth and value creation for shareholders.
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