Bullish indicating open at $55-$60, IPO prices at $37
Investing.com -- Morgan Stanley (NYSE:MS) downgraded GEA Group (ETR:G1AG) to Equal-weight from Overweight, saying the company’s self-help story is now well understood and that expectations for margin gains have already been priced in.
The broker lifted its price target to €62 from €57.
Gea shares slid 1.6% in Frankfurt trading following the downgrade.
The analysts noted that consensus 2028 EBITDA margin forecasts have risen by 200 basis points since September 2024, with absolute 2028 EBITDA estimates up 16% over the same period.
“We think it is now the right time to take a more balanced view on the stock,” a team led by Max R. Yates wrote, adding that they remain sceptical about a growth inflexion in the near term.
Morgan Stanley now sees the next leg of GEA’s equity story driven by revenue growth, but forecasts organic growth of 3% in 2025 and 2.5% in 2026, below the company’s target of more than 5% annually for 2025-2030.
The bank cited a still-challenging consumer backdrop, with inflation weighing on demand and limited growth in Food & Beverage sector capital expenditure over 2025-2026.
GEA has re-rated to trade in line with its mechanical peers, after historically being at a 15% discount. The stock is valued at 14.6 times 2026 estimated EV/EBITA and a price-to-earnings (P/E) of 20.2, with Morgan Stanley seeing limited scope for further re-rating.
“After a significant rise in consensus expectations, it becomes harder for GEA to keep surprising positively on margins, which has effectively been the key share price driver in the last 12 months,” the analysts said.
The bank raised its 2025-2027 EPS forecasts by around 5-6%, reflecting higher margin assumptions after GEA upgraded its guidance in July to 2-4% organic growth and 16.2-16.4% EBITDA margins for 2025.
Its base case assumes 2.4% growth and a 17.2% EBITDA margin in 2026, while the bull case sees 5% growth and 17.8% margins. In the sector, Morgan Stanley highlighted Sandvik and Legrand (EPA:LEGD) as preferred names.
Morgan Stanley said the next stage of GEA’s equity story will need to come from revenue growth, but noted that the consumer backdrop remains challenging and the company is likely to struggle to meet its target of more than 5% growth in 2026.