Street Calls of the Week
Investing.com -- BofA Securities upgraded Schneider Electric (EPA:SCHN) to “buy” from “neutral” and raised its price objective to €265 from €231, citing stronger growth prospects, accelerating margins and an attractive entry point for investors.
The brokerage said the stock, down 4% year to date, trades at a discount to peers despite exposure to key structural tailwinds.
“We upgrade Schneider to Buy for three key reasons: 1) exposure to structural tailwinds, such as data centres compounding growth (20% of sales) and the recovery of the European construction market in 2026E; 2) consistent HSD organic growth in 2025-27E, outpacing most peers; and 3) accelerating margin expansion from H2’25E as price tailwinds (+1% annualised) come through on top of strong volume and productivity benefits,” BofA said.
BofA expects adjusted EBITA margins to climb to 19.2% in the second half of 2025, ending the year at 18.7%, which is in line with management guidance of 18.7% to 19%.
The brokerage also raised 2026–27 estimates for sales and EBITA by about 1%. “Despite further upgrades to the DC capex outlook over the past few quarters, valuation has de-rated vs. other electrical peers, which we argue provides an attractive entry point,” the analysts said.
The brokerage pointed to Schneider’s strong data center exposure, which accounts for around 20% of sales and 24% of orders in 2024.
Data center revenue grew 55% between 2021 and 2024, with annual organic growth above 13%.
Schneider holds leading positions in the segment, including 22% global share in uninterruptible power supply, 23% in switchgear and 22% in power distribution units.
BofA projects Schneider’s data center orders to reach €12 billion in 2028, with the segment rising to 23% of group sales by 2026.
Beyond data centers, BofA expects Schneider to benefit from a construction recovery in Europe beginning in 2026, supporting further growth in its Products division, which represents 50% of sales.
Over 2025–27, the bank forecasts organic group sales growth of about 8%, within the company’s Capital Markets Day guidance of 7% to 10%. “We also expect sustainable above-average organic growth of c.8%,” analysts said.
Earnings forecasts also remain strong. Reported diluted EPS is projected at €8.23 in 2025, €9.77 in 2026 and €11.40 in 2027, compared with €7.50 in 2024.
Dividends are expected to rise from €3.90 a share in 2024 to €4.75 in 2027. Free cash flow yield is projected to increase from 3.29% in 2024 to 4.49% in 2027.
Schneider’s shares closed at €230.55 on September 24, while BofA’s new €265 target price implies more than 15% potential upside.
“Our PO rises to €265/$62 (prior: €231/$53), implying c.15%+ potential return,” the analysts said.