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Tuesday, shares of Assa Abloy (ST:ASSAb) (ASSAB:SS) (OTC: OTC:ASAZY), a $33.8 billion market cap security and lock manufacturer, witnessed a change in their stock rating as DNB Markets downgraded the company from Buy to Hold. The firm also adjusted the price target to SEK345.00 from the previous SEK390.00. According to InvestingPro data, the stock is currently trading near its 52-week low, with shares showing a modest 5% year-to-date return.
The revision by DNB Markets comes amid growing concerns about the uncertainty in end-markets, particularly in the United States, which could potentially affect investor consensus and sentiment towards the company. The analysts at DNB Markets highlighted the factors influencing their decision, noting the impact of foreign exchange movements and challenges arising from mergers and acquisitions, as well as certain non-recurring costs. The stock currently trades at a P/E ratio of 21.8x, which InvestingPro analysis suggests is high relative to its near-term earnings growth potential.
For the first quarter estimates, DNB Markets positioned themselves 7% below the consensus on adjusted EBIT (earnings before interest and taxes) for Assa Abloy. This stance is primarily due to the recent adverse foreign exchange movements and headwinds from the company’s recent mergers and acquisitions activity.
Moreover, the firm has revised its expectations for Assa Abloy’s adjusted EBIT from 2025 to 2027 downwards by 6%. This adjustment is attributed to the effects of foreign exchange fluctuations and a forecast for slightly lower margin assumptions than previously anticipated.
The downgrade and price target adjustment reflect DNB Markets’ cautious outlook on Assa Abloy’s near-term financial performance, considering the external economic factors that are likely to influence the company’s profitability.
In other recent news, Deutsche Bank (ETR:DBKGn) has adjusted its price target for Assa Abloy shares to SEK310, maintaining a Hold rating. This revision follows a decrease in earnings per share estimates by 6-7%, influenced by negative foreign exchange movements and expectations of more dilutive mergers and acquisitions. Assa Abloy is set to release its first-quarter results on April 23, with projections indicating organic growth around 2%. However, Deutsche Bank forecasts a decline in the adjusted earnings before interest and taxes margin to 14.8%, a decrease of 60 basis points year-over-year. This is also 70 basis points below the consensus. Deutsche Bank’s valuation of Assa Abloy stock employs a multiple of 16 times enterprise value to EBITDA and 21 times price to earnings, based on 2025 estimates. Despite the reduced price target, the bank recommends holding the stock, citing valuation reasons. The report also notes that increased fiscal spending in Germany and ongoing tariffs in the United States contribute to economic uncertainties.
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