Gerresheimer hit by downgrades after third FY25 profit warning

Investing.com -- Gerresheimer AG (ETR:GXIG) was downgraded by both Bernstein and Deutsche Bank (ETR:DBKGn) on Tuesday after the company issued its third profit warning for fiscal 2025, citing continued weakness in cosmetics and falling demand for oral liquid medication packaging. 

The repeated guidance cuts have raised concerns about management’s visibility and execution.

Deutsche Bank analyst Falko Friedrichs lowered his rating to “hold” from “buy” and cut the price target to €58 from €94. 

Friedrichs questioned how already known market challenges could trigger another downgrade just three months after the previous one, calling the company’s visibility “low.” He expects consensus adjusted EPS forecasts to be revised down by roughly 12%.

Bernstein also downgraded Gerresheimer to “underperform” from “outperform” and reduced its price target to €47.5 from €84.5. 

The brokerage flagged concerns about execution and a lack of transparency following an investor call on June 2, where management failed to provide clear explanations for the revised outlook. 

The call came after Gerresheimer cut its dividend proposal from €1.25 to €0.04 ahead of the June 5 shareholder meeting. 

The payout, equivalent to the statutory minimum of 4% of share capital, is expected to conserve about €40 million in cash.

The updated fiscal 2025 guidance now calls for 1–2% organic sales growth, down from the previous 3–5%. 

Adjusted EBITDA margin is forecast at around 20%, reduced from about 22%, while adjusted earnings per share are expected to fall in the low double digits, reversing earlier guidance of high single-digit growth.

Bernstein said its recent conversations with the company at the Nice Conference offered no hint of another revision. 

Analysts noted Gerresheimer had not provided sufficient detail on the scale of its oral liquid business, market share changes in cosmetics, or the impact of the Bormioli acquisition. 

The company maintained that performance will improve in the second half, but did not offer supporting evidence or address current market dynamics in syringes or margin compression in the second quarter.

Bernstein lowered its EPS estimate for fiscal 2025 by 18% to €4.31. It also cut margin expectations for the primary packaging glass division to 18% from 20.3%, reducing the overall group margin to 20.3%. 

Longer-term sales and EPS estimates through 2029 were revised down by 2% and 25%, respectively.

The brokerage raised its weighted average cost of capital to 10.8% from 10.3% due to higher risk factors.

With estimated fiscal 2025 leverage now at 4.1 times adjusted EBITDA, up from a previously expected 3 times, Bernstein forecast negative free cash flow of €99 million, well below management’s €0–50 million target. 

Analysts warned the revised guidance and weakening financials could constrain capital spending and reduce the likelihood of a private equity bid, which had been speculated earlier in the year.