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Investing.com -- Shares of SKF (ST:SKFb) fell more than 3% on Wednesday after the Swedish bearings and industrial components maker forecast flat fourth-quarter sales, offsetting slightly better-than-expected third-quarter results.
Jefferies described the quarter as “slightly better,” noting that “market conditions remain challenging with the quarter being flat on Q2.”
SKF reported that third-quarter revenue rose 2% organically to SEK22.5 billion, about 0.6% ahead of consensus expectations of SEK22.3 billion.
The firm said growth was driven mainly by the industrial division, which posted 3.8% organic revenue growth, while the automotive segment declined 2.3%.
By region, China and Northeast Asia recorded 5.6% organic growth, helped by less than 1% from “China wind prebuy.”
EMEA and the Americas each reported 1% organic growth, and India and Southeast Asia rose 2.2%.
Jefferies noted that “SKF was able to largely compensate for tariff increases in Q3 and is guiding similarly in Q4 despite the extended Section 232.”
Adjusted operating profit (EBIT) came in at SEK2.76 billion, 1% ahead of consensus expectations of SEK2.73 billion.
The Industrial division delivered SEK2.48 billion in adjusted EBIT, 1.3% above forecasts, while the Automotive division reported SEK280 million, slightly below the SEK282 million estimate.
The group’s adjusted EBIT margin was 12.3%, just ahead of expectations of 12.2%. The Industrial margin stood at 15.5%, and the Automotive margin was 4.3%.
Jefferies said the result was “driven by good pricing discipline, portfolio management and good cost control offsetting lower volumes.”
Net cash flow from operations totaled SEK1.84 billion, improving from SEK977 million in the first quarter but below SEK2.82 billion in the second quarter.
SKF reaffirmed its full-year guidance but said organic sales in the fourth quarter are expected to be relatively unchanged from a year earlier.
Jefferies wrote that the “Q4 guide is for org rev growth YoY as the company benefitted from higher one-off deliveries last year.” Consensus expectations stood at 1.6%.
Jefferies added that “separation is progressing according to plan.” The brokerage maintained a “hold” rating on SKF with a price target of SEK220, representing a 14% decrease from the previous closing price of SEK254.70.
SKF’s stock has traded between SEK157.70 and SEK255.90 over the past 52 weeks. The company’s market capitalization stands at SEK113.7 billion ($12.1 billion), with an average daily trading volume of $31.58 million.