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Investing.com -- Kion (ETR:KGX) shares surged over 9% on Tuesday following its preliminary fourth-quarter results that exceeded market expectations, alleviating concerns about the group’s profitability and operational strength.
The Germany-based manufacturer of industrial trucks and supply chain solutions reported a strong finish to 2024, with notable improvements in both revenue and margins, particularly in its Industrial Trucks & Services (ITS) division.
Analysts at Jefferies noted that ITS orders were robust, with margins outperforming expectations despite initial fears of a downturn.
The segment delivered an adjusted EBIT margin of 10.6%, an 85-basis-point improvement over prior estimates. This uptick provided relief to investors after a weaker showing in the third quarter, where margins had slipped to 10.1%.
Meanwhile, the Supply Chain Solutions (SCS) division also posted better-than-expected margin recovery, reflecting steady execution of its backlog, although order intake remained subdued.
Revenue for the quarter came in 2% ahead of consensus forecasts, while adjusted EBIT outperformed expectations by 17%, signaling strong operational efficiency.
Free cash flow was another highlight, finishing 32% ahead of Visible Alpha consensus estimates.
The company’s disciplined approach to working capital management has been a key factor in its cash flow resilience post-pandemic.
Despite the strong finish to the year, Kion flagged challenges ahead. Competition from Chinese forklift manufacturers continues to pose a risk, particularly as they gain market share in Europe.
Additionally, restructuring measures announced by the company are expected to weigh on 2025 earnings.
Kion plans to incur costs between €240-260 million over the year as part of these initiatives, with projected annual cost savings of €140-160 million by 2026.
While these actions are likely to dampen near-term profitability, Jefferies analysts believe they will provide much-needed financial headroom for future investments, particularly in software and AI-driven supply chain solutions.
With the stock rebounding strongly in response to the latest results, investor sentiment appears to be shifting in favor of Kion.
Jefferies maintains a "buy" rating on the stock, with a price target of €51, implying a potential upside of 46% from current levels.