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Investing.com -- Shares of Knorr-Bremse fell by 1.3% as the market responded to the company’s latest financial results. Despite confirming its 2025 outlook and reporting orders 15% ahead of consensus, Knorr-Bremse’s revenues and operating EBIT came in below expectations, contributing to the stock’s decline.
The company confirmed its guidance for 2025, targeting revenues between €8.1 billion and €8.4 billion, operating EBIT margin of 12.5-13.5%, and free cash flow (FCF) of €700-800 million. These targets are in line with consensus estimates, which forecast revenues of €8.176 billion and an operating EBIT margin of 13.1%. The FCF consensus sits at €740 million.
Knorr-Bremse reported a strong order intake of €2.376 billion, which outpaced the consensus estimate of €2.066 billion. The Rail Vehicle Systems (RVS) orders surpassed expectations by 13%, while Commercial Vehicle Systems (CVS) orders exceeded them by 18%.
RVS experienced a 19% organic growth and was further boosted by Signalling, with a book-to-bill ratio of 1.23x. CVS saw a 5% organic growth, mainly driven by strength in the European Union, and a book-to-bill ratio of 1.19x. The order book grew by 11% organically in RVS but remained flat in CVS.
However, the company’s revenues slightly missed the mark, coming in at €1.958 billion, which is 1% lower than the consensus of €1.973 billion. Both RVS and CVS segments reported revenues 1% below expectations. RVS grew 4% organically, fueled by the EU aftermarket and original equipment in North America and the Asia-Pacific region. In contrast, CVS witnessed an 8% organic decline, with weaknesses in EU and North American trucks, although the Asia-Pacific market remained stable. The aftermarket’s share increased to 55% in RVS and 34% in CVS.
Operating EBIT was also below consensus, reported at €236 million, which is 3% lower than the expected €243 million. This resulted in an operating EBIT margin of 12.1%, approximately 25 basis points below the consensus of 12.3%. The RVS operating EBIT margin fell short by 3%, standing at 15.6%, while CVS’s operating EBIT margin was 5% below expectations at 9.5%.
Management noted that CVS margins were impacted by volumes, regional mix, and higher R&D costs. However, RVS margins improved by 50 basis points YoY, driven by growth in Signalling and a supportive mix in the Asia-Pacific and Aftermarket segments.
In terms of FCF and the balance sheet, Knorr-Bremse reported a FCF of €15 million. Excluding a tax refund, the underlying FCF was -€18 million, which still marks a significant YoY improvement from -€95 million. Working capital stood at €1.557 billion, increasing from 69 to 72 days, but showed an improvement YoY excluding the impact of Signalling.
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