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Investing.com -- Jefferies downgraded Skanska to “hold” from “buy,” setting a price target of SEK 200, reflecting an 18% potential downside from the base case target of SEK 295.
The downgrade follows concerns about a deteriorating economic outlook, reduced construction activity, and potential valuation impairments in the company’s property portfolio.
According to Jefferies, Skanska’s performance remains tied to trends in construction and real estate transactions, which face growing headwinds if macroeconomic conditions worsen.
The brokerage’s downside scenario assumes a 50% discount to book value for Skanska’s invested capital, indicating significantly weaker demand and a slower pace of property transactions.
The analysis flags risks to the company’s cash flow, which could increasingly rely on the construction division as commercial and residential property sales decline.
Jefferies said that in this scenario, reduced transaction volumes would limit Skanska’s ability to realize gains from its development assets, resulting in lower earnings visibility.
Despite a strong order backlog and stable activity across Nordic and Central European markets, Jefferies noted that the outlook for Skanska’s commercial and residential segments could weaken if interest rates remain elevated or if economic sentiment softens further.
The brokerage also points to potential valuation impairments in the development portfolio should market recovery in Sweden and the United States stall.
While Jefferies’ base case assumes gradual improvement in sentiment and demand supported by falling interest rates and fiscal stimulus, the downside case outlines a more cautious view.
In that scenario, economic weakness would erode Skanska’s profitability, limit capital recycling opportunities, and weigh on the company’s share price performance.
Jefferies’ price target of SEK 200 under the downside scenario reflects a reassessment of Skanska’s exposure to cyclical property markets and construction activity, emphasizing that valuation pressures could persist if macro conditions deteriorate.