Rational AG shares drop over 6% after Q1 miss, full-year guidance confirmed

Investing.com -- Rational AG’s (ETR:RAAG) (LON:0FRJ) stock dropped more than 7% after the company reported a slight miss in its first-quarter 2025 results, confirming its full-year guidance despite the disappointing performance. 

EBIT, and net profit came in below consensus estimates. Sales for the quarter were 3% below expectations, while EBIT and net profit were 5% and 1% lower than analysts had forecasted, respectively.

The German manufacturer reported revenue growth of 3%, with North America and Europe (excluding Germany) showing stronger performances. 

North America saw an 11% year-over-year growth, and Europe (excluding Germany) posted a 7% increase. 

However, Asia posted a downturn, with a 20% drop in revenue, largely attributed to challenging year-over-year comparisons.

The iCombi product line posted a relatively modest 2% growth for the quarter, falling 4% below expectations. 

In contrast, the iVario product line showed stronger performance, with a 10% year-over-year increase, although it also missed consensus forecasts.

EBIT for the quarter stood at €72 million, representing a 1% increase from the same period last year.

However, the EBIT margin decreased to 24.4%, which was 40 basis points lower than the prior year and also below consensus expectations of 24.9%. 

Operating costs rose 10%, primarily driven by the recruitment of additional sales staff and rising event-related expenses. 

Additionally, research and development costs surged by 30%, partly due to lower capitalisation of R&D investments.

Despite the soft performance in Q1, the company confirmed its full-year guidance. Management expects mid-single-digit revenue growth for the year and an EBIT margin of around 26%. 

RBC Capital Markets noted that analysts are projecting an 8.7% increase in revenues this year, with an EBIT margin of 26.2%, suggesting the company anticipates stronger performance in the latter part of 2025.

Rational’s management has acknowledged the potential impact of tariff risks, especially as around 20% of group sales come from the U.S. and all ovens are imported from the European Union. 

A 10% tariff on U.S.-bound exports, valued at approximately €120 million, could hurt the company’s earnings. 

However, RBC Capital Markets suggests that Rational could mitigate this risk by implementing a 5% price increase, which would fully offset the tariff’s impact. 

Without such price adjustments, Rational might face an earnings hit of around €10 million, or 3% of its group EBIT. Despite the challenges, RBC maintains an Underperform rating on the stock with a price target of €610.