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On Tuesday, Bernstein analysts initiated coverage on Geberit AG (SIX:GEBN:SW) (OTC: GBERY), a leading provider of sanitary products, with an Underperform rating. Accompanying this rating, they have set a price target of CHF 440.00. The new coverage by the research firm suggests a cautious outlook for the company’s near-term performance. According to InvestingPro data, Geberit currently trades near its 52-week high of $72.02, with a market capitalization of $23.6 billion and an overall financial health score rated as "GOOD."
Bernstein’s analysis indicates that Geberit’s business, which relies on late-cycle products, is expected to experience a growth delay compared to its market. The firm’s products typically see an uptick in demand 9-15 months following an increase in residential permits. With recent signs of recovery in European residential permits, Bernstein forecasts that Geberit’s volume growth will not be apparent until the end of 2025 or midway into 2026. While the company maintains impressive gross profit margins of 73% and has raised its dividend for 14 consecutive years, InvestingPro analysis suggests the stock is currently trading above its Fair Value.
The report highlights that Geberit’s position in the market is less favorable compared to its competitors, such as Sika (SIX:SIKA) and Saint-Gobain. These peers are anticipated to benefit from the recovery in the underlying markets more directly and promptly. The timing lag inherent in Geberit’s product demand cycle is the primary reason for Bernstein’s underperform rating. The stock currently trades at a P/E ratio of 32.5x and an EV/EBITDA multiple of 23x, suggesting relatively high valuations compared to industry peers. Get deeper insights into Geberit’s valuation metrics and 12 additional ProTips with an InvestingPro subscription.
Bernstein’s assessment of the company’s prospects is rooted in the observed trends within the residential construction permits in Europe. Their analysis, as detailed in exhibits 185 to 190, shows the early stages of recovery, which typically lead to increased sales for Geberit. However, due to the nature of the company’s late-cycle products, this recovery in permits will take some time to translate into tangible growth for Geberit.
The price target set by Bernstein reflects their expectations for the stock’s performance, taking into account the anticipated delay in volume growth for Geberit’s products. The company will likely watch the market closely as it navigates through the lag in demand and aims to capitalize on the eventual market recovery.
In other recent news, Geberit AG has seen significant developments that could impact investor decisions. CFRA analyst Lee Zhao Jun upgraded Geberit’s stock rating from Hold to Buy, raising the price target from CHF550.00 to CHF680.00. This upgrade is based on a positive outlook for the European construction market and Geberit’s net sales growth of 2.5% year-over-year to CHF3.1 billion for 2024, despite negative currency effects. CFRA anticipates a valuation recovery for Geberit in 2025, with a focus on the renovation market and stable pricing power, supported by a share buyback program of up to CHF300 million.
Meanwhile, Citi analysts, led by Ephrem Ravi, have adjusted their outlook by increasing the price target for Geberit from CHF555.00 to CHF600.00, while maintaining a Neutral rating. They project approximately 4% volume growth for Geberit in 2025, driven by a gradual recovery in the European construction sector. However, Citi remains cautious due to Geberit’s stock trading at a high valuation, about 22 times the 2025 estimated EV/EBITDA, which limits upside potential. Both analyst firms highlight Geberit’s strategic positioning in the European market, despite differing views on its stock’s valuation and growth potential.
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