Bilfinger falls as UBS downgrades to “neutral” after 100% YTD surge

Investing.com -- Shares of Bilfinger (ETR:GBFG) slipped after UBS downgraded the industrial services group to “neutral” from ‘buy,” citing a more balanced risk-reward profile following a year-to-date rally of over 100%, in a note dated Friday. 

While UBS raised its 12-month price target on the stock to €92 from €86, it said the current share price of €93.40 already reflects expectations for higher margins and revenue growth, leaving limited room for upside.

The downgrade comes ahead of Bilfinger’s second-quarter results expected in August. 

UBS said its updated forecasts incorporate recent bolt-on acquisitions and anticipated benefits from Germany’s delayed fiscal stimulus, but warned that valuation now looks fair. 

The brokerage also pointed to execution risks, particularly in Bilfinger’s E&M International segment, where expansion depends on mergers and acquisitions and is clouded by legal uncertainty in the United States.

In June, a lawsuit was filed in Georgia in connection with a fatal gangway collapse in October 2024 involving Bilfinger’s U.S. subsidiary, Centennial. 

The company was not responsible for the design or installation of the collapsed structure, but is named as a defendant. 

UBS said the outcome and financial impact of the case remain unclear, and could delay Bilfinger’s planned exit from higher-risk U.S. project business.

Despite the downgrade, UBS acknowledged Bilfinger’s improved margins and profitability under current management. 

Adjusted EBITA margins rose from around 3% in 2021 to over 5% in 2024, and the brokerage expects further gains to 6.4% in 2026. UBS’s new valuation uses a higher 10x EV/EBITA multiple versus 9.5x previously, but still applies a discount to peer SPIE, which trades at 12.1x.

Bilfinger is forecast to post earnings per share of €5.43 in 2025, rising to €6.67 in 2026 and €7.04 in 2027. 

UBS estimates equity free cash flow yield will reach 6.3% in 2026, slightly below SPIE’s 6.7%. The company’s balance sheet remains strong, with net cash expected to climb to €215 million in 2026 and €354 million in 2027.