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On Thursday, Bernstein SocGen Group revised its price target on KION Group AG (KGX:GR) (OTC: KIGRY) to €50.00, a decrease from the previous €53.00, while maintaining an Outperform rating on the company’s shares. The adjustment follows a volatile response in the stock market to KION’s recent announcement of an efficiency program aimed at bolstering long-term profitability. According to InvestingPro data, KION, currently valued at $4.76 billion, appears undervalued based on its Fair Value analysis.
The company had reported solid financial results for the fiscal year 2024, which initially appeared to be positive news, leading to a surge in its share price by 12% at its peak on Wednesday, closing with a 2% gain. However, the following day, shares fell by 4%, culminating in a net 2% decrease since the announcement. This volatility aligns with InvestingPro analysis, which shows the stock has gained 8.79% year-to-date despite significant price swings. With revenue of $12.83 billion and an attractive free cash flow yield of 18%, KION demonstrates strong fundamental performance.
Despite the market’s reaction, Bernstein analysts believe the efficiency program should enhance the profitability of KION’s Industrial Truck & Services (ITS) segment and increase the company’s resilience, particularly as the savings are expected to primarily impact fixed costs. The analysts have slightly raised their long-term ITS adjusted EBIT margin forecast by 20-30 basis points but see a neutral impact on valuation from the efficiency program at this stage due to uncertainties about lasting effects, increased competition from China, and a subdued outlook in Europe.
Moreover, Bernstein has increased its weighted average cost of capital (WACC) assumption for KION to 9.5% from 9.1%, while also rolling over the valuation by one quarter, leading to the reduced price target of €50.00. Despite the downward adjustment, the new target still implies a significant upside potential of 47% for the stock. Bernstein views the recent negative stock reaction as an opportune moment for investors to increase or establish a position in KION Group, given its role in the structural trends of warehouse automation. InvestingPro subscribers can access additional insights, including 6 key ProTips and a comprehensive Pro Research Report, which provides detailed analysis of KION’s valuation metrics, including its attractive P/E ratio of 13.8x relative to growth prospects.
In other recent news, KION Group AG received an upgrade from BofA Securities, which shifted its rating from Neutral to Buy. This change comes in light of the growing demand for logistics and warehouse automation, a trend influenced by nearshoring strategies. BofA Securities also adjusted KION’s price target upward to €48.50, a significant increase from the previous €39.50.
The consensus estimates for KION now reflect the potential challenges that the company might encounter up to 2025, according to BofA Securities. Despite the firm’s projections remaining approximately 3% below the consensus on KION’s 2025 adjusted EBIT, it anticipates investors will soon focus on the expected increase in warehousing demand from the second half of 2025.
These recent developments occur against the backdrop of KION’s performance relative to the broader market. Despite underperforming the SXNP index by about 30% year-to-date, KION is currently trading at a discount of approximately 58% compared to the index, the largest since the company’s listing. BofA Securities remains optimistic about KION’s potential for growth in the warehouse automation sector, particularly as nearshoring trends continue to shape global supply chain strategies.
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