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Investing.com -- Shares of Prysmian (BIT:PRY) traded lower on Wednesday despite the company unveiling ambitious 2028 financial and strategic targets.
Analysts at Jefferies attributed the decline to the company’s adjusted EPS guidance falling short of expectations, alongside concerns over elevated capital expenditures and near-term cash flow pressures.
Prysmian projects an adjusted EBITDA range of €2,950-3,150 million for 2028, broadly in line with consensus estimates of €2,979 million.
Free cash flow is forecast between €1,500-1,700 million, close to the market expectation of €1,609 million.
However, adjusted EPS guidance of €4.60-5.20 lags behind the consensus forecast of €5.50, reflecting higher depreciation, amortization, and below-the-line costs.
Return on capital employed is projected at 20-22%, while over 55% of revenues are expected to come from solutions, a significant jump from 28% in 2024.
Transmission remains a key growth driver, with Prysmian forecasting a 25-28% compound annual growth rate in transmission EBITDA through 2028.
This outlook surpasses the 20% market consensus, with the company expecting transmission EBITDA of at least €880 million—about 20% ahead of the consensus projection of €740 million.
Analysts see this as a positive for valuation, given the higher multiples typically assigned to transmission businesses.
The company has also outlined an investment plan to expand capacity, particularly in North America.
A €245 million investment in power grid capacity is set for completion by the third quarter of 2027.
Meanwhile, Prysmian expects synergies from the Encore Wire (NASDAQ:WIRE) acquisition and benefits from integrating Channell, which is expected to contribute €150 million in EBITDA by 2028.
On capital allocation, Prysmian is targeting €5 billion in cumulative free cash flow over 2025-2028, with €1.1 billion allocated for dividends, supporting a 12% CAGR in dividend per share (DPS), in line with market expectations.
An additional €1.3 billion will go toward deleveraging, while €2.6 billion is earmarked for M&A or share buybacks, with repurchases expected to resume in 2027 after a period of balance sheet strengthening.
Despite these moves, concerns remain over execution risks in high-voltage projects, potential pricing pressures in low-voltage markets, and broader macroeconomic uncertainties. The delay in share buybacks until 2027 may also be contributing to investor hesitation.
Jefferies maintains a ’buy’ rating on Prysmian, with a price target of €75, representing a 32% upside from the last closing price of €56.76. The stock has traded between €47.28 and €72.76 over the past year, with a market capitalization of €16 billion.