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On Friday, CFRA analyst Lee Zhao Jun upgraded Geberit AG (SIX:GEBN:SW) (OTC: GBERY) from Hold to Buy, increasing the price target from CHF550.00 to CHF680.00. The upgrade reflects a positive outlook on the European construction market’s potential recovery. The market has responded positively to this outlook, with Geberit’s stock showing a strong 13% return over the past week and currently trading near its 52-week high of $67.22. According to InvestingPro analysis, the company maintains impressive gross profit margins of 73%. Geberit’s net sales for 2024 grew by 2.5% year-over-year to CHF3.1 billion, adjusted for negative currency effects of CHF76 million, primarily due to increased volumes from wholesaler inventory rebuilding in the first half of 2024 and the strong performance of new products. With a market capitalization of $21.7 billion and a consistent dividend payment history spanning 25 years, Geberit demonstrates strong market presence. InvestingPro subscribers have access to 12 additional key insights about Geberit’s financial health and market position.
The analyst’s decision is supported by an expected valuation recovery for Geberit in 2025. Despite a lack of earnings guidance and an anticipated slight decline in the new building construction industry, a stable to slightly positive trend is foreseen in the renovation market. The company currently trades at an EV/EBITDA multiple of 22.7x and a P/E ratio of 32x, reflecting market optimism about its growth prospects. For detailed valuation metrics and comprehensive analysis, visit InvestingPro. This is attributed to the turnaround in interest rates in Europe and a structural move towards higher sanitary standards.
Geberit’s ability to maintain resilient pricing power is likely to counterbalance the forecasted flat demand. Additionally, a share buyback program of up to CHF300 million is anticipated to help stabilize the stock price. This is particularly relevant in light of the expected revenue decline in key markets such as Germany and Sweden.
The upgrade to Buy from Hold by CFRA is based on a 2025 EV/EBITDA multiple of 25x, which is a modest increase from Geberit’s five-year average EV/EBITDA of 20.4x. The analyst justifies this higher multiple with the company’s potential for recovery and growth. CFRA has maintained its earnings per share (EPS) estimates for Geberit at CHF18.40 for 2025 and CHF20.00 for 2026, signaling confidence in the company’s financial prospects.
In other recent news, JPMorgan has initiated coverage on Geberit AG with an Underweight rating, citing concerns over margin pressures and market challenges. The financial firm has set a price target of CHF 450.00, suggesting that Geberit’s stock is currently overvalued. According to JPMorgan, Geberit’s valuation is 5% above its long-term average and 61% higher than the EU Lightside sector average, which does not adequately consider the potential challenges the company may face. The lack of positive earnings momentum is a particular concern, with JPMorgan’s 2025 EBITDA estimates being 3% below the consensus. Over the years, Geberit’s EBITDA has shown only a 1% increase from 2019 to the estimated figures for 2024, while net income has decreased by 7%. Despite these figures, the company’s shares have experienced a re-rating of approximately 30% during this period. Additionally, JPMorgan points out that Geberit’s largest market, Germany, may underperform compared to broader Europe, limiting the potential for positive surprises. The firm also highlights that Geberit’s position as a late-cycle volume recovery play could lead to higher costs if demand increases, potentially constraining margin expansion.
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