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Investing.com -- Elekta (ST:EKTAb) saw its shares surge more than 11% on Wednesday after reporting second-quarter results that exceeded expectations on profit margins, even as order growth remained sluggish.
The Swedish medical technology company’s order book grew 2% at constant exchange rates in the quarter, below the 3% consensus estimate, while group sales reached SEK4.07 billion, slightly under the expected SEK4.09 billion. Organic sales grew 0.8%, above the 0.3% analyst forecast.
Adjusted earnings before interest and taxes (EBIT) totaled SEK411 million, surpassing the SEK382 million consensus, with an adjusted EBIT margin of 10.1% versus the expected 9.4%. Adjusted earnings per share were SEK0.64, exceeding the consensus of SEK0.61 by 6%.
Regional performance diverged significantly. European sales increased 11% at constant exchange rates. In contrast, the Americas saw an 8% organic decline, while Asia-Pacific sales fell 3% organically.
In China, sales continued to decline due to weak orders from the previous year, and U.S. sales remained soft as customers awaited clearance for Elekta’s Evo product.
The quarter benefited from the easiest year-over-year comparisons of the fiscal year, with order intake having fallen 9% at constant exchange rates in the same period last year.
Despite the launch of the new Evo linear accelerator and additions to the Elekta ONE software suite, the book-to-bill ratio remained at 1x, or 1.09x on a rolling 12-month basis.
Elekta’s adjusted gross margin rose to 37.9%, up 220 basis points year-over-year. The company attributed the improvement to product launches, a higher share of service revenue, price increases, and strong performance in specialty products.
Foreign exchange effects reduced margins by 50 basis points, while tariffs cut another 70 basis points.
The company announced plans for a new operating model designed to create a more simplified and decentralized organization.
Management said the restructuring is expected to generate annual cost savings of at least SEK500 million, equivalent to approximately 275 basis points of margin improvement, with full effects anticipated in the first quarter of fiscal 2026/27.
Elekta also canceled SEK2.20 billion in orders to strengthen predictability and profitability, reducing the backlog by 6% to SEK34.2 billion.
Management reiterated guidance for sales growth in fiscal 2025/26, with consensus projecting 2.4% growth at constant currency, but provided no specific margin target.
Analysts forecast an 11.4% adjusted EBIT margin for the full year, compared with 11.6% in fiscal 2024/25.
Management noted that sales in China are expected to recover in the second half of the year, while foreign exchange and tariffs are likely to continue pressuring earnings.
The company did not formally reiterate its long-standing midterm target of achieving a 14% or higher EBIT margin. The company announced two external events, a strategy update scheduled for January and a capital markets day planned for mid-June.
Shares of Elekta have declined about 30% over the past year and more than 25% year-to-date, trading near historical lows of roughly 13 times estimated 2026 earnings. The stock closed at SEK44.54 on Tuesday.
Jefferies maintained a “hold” rating on the shares with a price target of SEK53, representing a 19% upside.
“We stress Q2 accounted for ~25% of FY EBIT over the past 5yrs,” the brokerage said, and questioned whether the company could sustain top-line momentum given flat order intake over the past two years.