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Investing.com - Goldman Sachs downgraded Volvo AB (SS:VOLVB) (OTC:VLVLY), a $63.7 billion machinery giant, from Buy to Neutral while slightly raising its price target to SEK298.00 from SEK297.00. According to InvestingPro data, the stock has shown strong momentum with a 29% gain year-to-date.
The investment bank cited limited upside potential for the stock as the primary reason for the downgrade. Goldman’s analysts have positioned their forecasts 9% to 10% below consensus estimates for Volvo’s adjusted EBIT in fiscal years 2025 and 2026. InvestingPro’s Fair Value analysis suggests the stock is currently fairly valued, trading at a P/E ratio of 15.7x.
Near-term tariff headwinds are expected to pressure Volvo’s margins, particularly in its construction equipment division which largely imports products into the United States, according to the research note.
Despite the downgrade, Goldman Sachs maintains a more positive long-term outlook for Volvo compared to industry consensus. The firm believes Volvo will benefit from its balanced regional positioning versus competitors, particularly if a 25% tariff on heavy-duty trucks is implemented from 2026 onward. The company’s strong financial health is evident in its $52.9 billion revenue base and robust profit margins.
Goldman Sachs also anticipates Volvo will announce a special dividend at year-end that exceeds market expectations, projecting an ordinary dividend of SEK8.50 per share plus a special dividend of SEK11.00 per share to be announced in January 2026. This aligns with Volvo’s strong dividend track record, currently yielding 5.07%. Get deeper insights into Volvo’s financial health and access exclusive ProTips with InvestingPro.
In other recent news, Volvo has agreed to sell its 70% stake in the Chinese construction equipment manufacturer Shandong Lingong Construction Machinery Co. The transaction is valued at approximately $833 million and involves the minority shareholder, Lingong Group, as the buyer. Volvo initially acquired this stake in 2006 to access the domestic Chinese construction equipment market. The deal is anticipated to finalize in the second half of 2025. These developments reflect Volvo’s strategic decisions in managing its investments.
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