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Investing.com -- Schneider Electric shares rose after Morgan Stanley upgraded the stock to “overweight” from “equal-weight,” citing a “momentum shift in margins” and raising its price target to €280 from €240, in a note dated Monday.
The brokerage said improving productivity, pricing, and software performance could drive stronger profitability through 2026 and 2027.
The stock closed at €249.10 on Oct. 23, giving the French group a market capitalization of €145.5 billion and an enterprise value of €163.9 billion, according to the analysts, Schneider has traded between €217 and €280 over the past 52 weeks.
“We see scope for a renewed push on cost efficiency in 2025-26,” analyst Max Yates said.
“Schneider has showed limited margin expansion versus Electrification peers in 2025, but we expect its margin expansion to lead peers in 2026-27.”
The brokerage forecast 8% organic revenue growth and 100 basis points of EBITA margin expansion by 2027, driving 17% EPS growth that would outpace the sector.
Morgan Stanley projects group sales to rise from €38.2 billion in 2024 to €40.2 billion in 2025 and €42.8 billion in 2026, with EBIT increasing from €6.9 billion to €8.2 billion over the same period.
Earnings per share are expected to grow from €8.42 in 2024 to €8.86 in 2025 and €10.05 in 2026. The bank forecasts an EBITA margin of 20.5% in 2027, which is 60 basis points above consensus.
Valuation has eased to more attractive levels, Morgan Stanley said. Schneider trades at 24.4x 2026e P/E, roughly in line with ABB (23.7x) and Legrand (23.9x).
The company’s EV/EBITA multiple is projected to fall from 18.9x in 2026 to 16.1x in 2027, while the free-cash-flow yield should improve from 2.7% in 2025 to 4.4% in 2027. Net debt to EBITDA is estimated at 1.6x in 2025, leaving room to restart share buybacks in 2027, the brokerage said.
Dividends are forecast to rise from €3.50 a share in 2024 to €3.99 in 2025 and €4.40 in 2026, with the yield improving from 1.5% to 1.6%.
Morgan Stanley described Schneider’s data-center operations as a world-class business and a long-term advantage because of its end-to-end power and cooling systems and its partnership with NVIDIA.
The company has developed reference designs for NVIDIA’s GB200 and GB300 AI servers and joined the chipmaker’s 800-volt DC architecture program in October 2025.
The analysts expect Schneider’s Dec. 11 Capital Markets Day to confirm medium-term targets, extending the current 7-10% annual revenue growth goal through 2029 and lifting margin ambitions beyond 21%.
New productivity measures could deliver €1.5 billion of cumulative savings between 2026 and 2028, the report added.
Morgan Stanley said the year-to-date underperformance of Schneider’s stock has created “an attractive entry point” as the margin story improves. “We think the year-to-date underperformance has created an attractive entry point, at a time when the equity story around margin expansion is about to improve into 2026/27,” the analysts said.