Bernstein bullish on FANUC stock—broad-based recovery to drive 2025 gains

On Monday, Bernstein SocGen Group signaled increased optimism for FANUC Corp (6954:JP) (OTC: FANUY (OTC:FANUY)) stock, upgrading the industrial automation giant's stock rating from Market Perform to Outperform. Accompanying the rating upgrade, the firm also raised the price target to JPY5,600.00, up from the previous JPY5,100.00. According to InvestingPro data, FANUC, a prominent player in the Machinery industry, is currently trading near its Fair Value with a solid financial health score rated as "GOOD."

The upgrade comes on the heels of FANUC's positive performance, with the company posting two consecutive quarters of new order growth. Bernstein analysts, led by Jay Huang, attribute this momentum to the company's alignment with the global Factory Automation (FA) cycle indicator, which has shown a near-perfect correlation with FANUC's orders and revenue. With last twelve months revenue of $5.46 billion and EBITDA of $1.39 billion, investors anticipating the company's next earnings report on January 27 can access deeper insights through InvestingPro, which offers additional exclusive tips and detailed financial metrics.

Looking ahead, Bernstein anticipates a broad-based recovery in the sector, which began slowly in 2024, to significantly pick up pace in 2025. The firm forecasts an acceleration in FANUC's top-line growth to 15% in FY3/26, a substantial increase from the 2% growth observed in FY3/25.

Previously, concerns regarding FANUC's depressed margins had restrained Bernstein from upgrading the stock sooner. However, these concerns are being alleviated as the company's inventory levels have peaked, and production is expected to ramp up, potentially aiding in margin recovery. The company maintains strong liquidity with a current ratio of 6.91 and has consistently paid dividends for 33 consecutive years, demonstrating financial stability.

InvestingPro subscribers can access over 30 additional financial metrics and exclusive insights about FANUC's financial health and growth potential. Additionally, the concern over margin impact from a product mix shift from FA to robotics is now considered a non-issue for the next 4-6 quarters. Bernstein's analysis suggests that the cyclical FA recovery is typically stronger than that of the robotics sector, which should bode well for FANUC's financial performance.

Investors and market watchers may see this upgrade as a positive sign for FANUC's future prospects, particularly as the company seems poised to capitalize on the anticipated acceleration in the FA cycle over the coming year.

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