Sandvik shares rise as Q3 order intake tops forecasts but margins lag

Investing.com -- Sandvik AB (ST:SAND) shares traded higher on Monday after the Swedish engineering group reported stronger-than-expected order intake across all major divisions in the third quarter of 2025, offsetting weaker revenue and profit performance.

Order intake rose across the company’s three key segments. Mining increased 3.5%, Rock Processing advanced 2.4% and Machining gained 2.7%. 

The company’s total order intake beat expectations, supported by steady demand through early October. 

Daily order intake during the first two weeks of October was stable compared with the third quarter, after accounting for normal seasonality.

Revenue came in 2.1% below consensus, driven by a 3.7% decline in Mining, a 2.5% drop in Rock Processing and a 1.9% decrease in Machining. 

EBITA also fell short of expectations, with Mining down 5.8% due to costs tied to an enterprise resource planning (ERP) transition. EBITA in Rock Processing fell 1.5% and in Machining declined 2.4%.

Morgan Stanley said the company’s Mining margins were affected by ERP-related costs, while Machining margins were hurt by currency effects.

Sandvik guided for a substantial foreign exchange headwind of about SEK 1 billion in the fourth quarter, compared with a SEK 800 million impact based on currency rates at the end of June. The higher headwind could pressure margins year over year.

Within Machining and Intelligent Manufacturing, Sandvik reported double-digit order growth in Software and high single-digit growth in Cutting Tools. The strength was not limited to the Powder business.

The company maintained its 2025 guidance for capital expenditures at approximately SEK 4.5 billion. 

It estimated a transaction and translation currency effect of about negative SEK 1 billion on EBITA in the fourth quarter compared with the same period a year earlier. 

Net interest expense is expected at about SEK -0.8 billion for the year, with a normalized tax rate of 23% to 25%. These figures are unchanged from previous guidance.

Morgan Stanley noted that the quarter’s results presented a mixed picture. Order intake exceeded expectations across divisions, but both revenue and EBITA came in light. 

The brokerage viewed the stability in order trends and strength in Software and Cutting Tools as positive developments, though profitability was affected by ERP costs and foreign exchange movements.

The analysts said Sandvik’s strong order performance implies continued business momentum, even as near-term margins face pressure from currency headwinds.

Sandvik is trading at 16.2 times its estimated 2026 enterprise value to EBIT, compared with a historical median of 12.3 times. 

The company trades at about a 10% premium to the sector, versus a historical median discount of about 6%, said analysts at Morgan Stanley.