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Investing.com - Bernstein analyst Harry Martin upgraded Volvo AB (SS:VOLVB) (OTC:VLVLY), a prominent machinery player with a $57.24 billion market cap, from Underperform to Market Perform and raised the price target to SEK270.00 from SEK240.00.
The upgrade follows significant share price underperformance driven by 15-20% cuts to 2025/2026 EBIT estimates over the past six months. Despite this, the stock has delivered a strong 21.61% YTD return, currently trading at 14.29x P/E. According to InvestingPro analysis, the stock appears fairly valued based on its proprietary Fair Value model.
Bernstein notes that while it is cutting forecasts for U.S. trucks, its estimates are no longer below consensus, and the current valuation fairly reflects Volvo’s position in the cycle based on historical correlation.
The firm highlights Volvo’s advantageous regional exposure, with less than 25% of EBIT coming from the U.S. and more than 50% from Europe, along with diversified business segments including Construction Equipment and Volvo Penta, which maintains high teens EBIT margins.
Downside risks remain, including potentially disappointing Q3 results, particularly regarding order intake, and concerns about 2025 dividend returns with estimated free cash flow projected to decrease 68% year-over-year.
In other recent news, Volvo AB is preparing to release its third-quarter results, with Deutsche Bank adjusting its price target for the company to SEK305.00 while maintaining a Buy rating. The bank expects stable market conditions in Europe to drive order growth, although it anticipates a significant decline in North American orders. In contrast, Goldman Sachs has downgraded Volvo AB from Buy to Neutral, citing limited upside potential. Despite this downgrade, Goldman Sachs slightly increased its price target to SEK298.00. The investment bank’s analysts project that Volvo’s adjusted earnings before interest and taxes (EBIT) will be 9% to 10% below consensus estimates for the fiscal years 2025 and 2026. These recent developments highlight differing perspectives from major financial institutions regarding Volvo’s future performance.
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