Stifel downgrades Hexagon AB to "hold," citing limited near-term upside

Investing.com -- Hexagon AB (ST:HEXAb), the Swedish industrial technology company, has been downgraded by analysts at Stifel, who cited limited near-term upside for the stock. 

The rating has been adjusted to "hold" from "buy,” with the price target reduced to SEK 130 from SEK 135. 

While acknowledging Hexagon’s strong long-term positioning, analysts at Stifel expressed concerns over the company’s near-term growth prospects amid ongoing trade tensions and macroeconomic uncertainty.

Stifel’s revised outlook comes as Hexagon’s board of directors confirmed plans for a spin-off that will include the entire Safety, Infrastructure & Geospatial (SIG) division. 

The decision to expand the scope of the spin-off underscores a strategic shift, with the new entity set to be listed in the U.S. by the first half of 2026. 

According to Stifel’s estimates, the standalone entity, referred to as NewCo, could be valued at approximately 8.5 times sales or 29 times EBIT (after share-based compensation), while the remaining Hexagon business, RemainCo, is projected to be valued at 17 times EBIT. These valuations led the analysts to conclude that Hexagon’s stock is fairly priced at SEK 130.

Although Hexagon has a limited direct exposure to U.S. tariffs—amounting to about 6% of group revenue—the broader geopolitical climate and trade disputes are expected to weigh on global investment patterns. 

This uncertainty, combined with a cyclical downturn in Hexagon’s hardware business, has prompted a downward revision of the company’s near-term earnings outlook. 

Stifel now forecasts a 1.9% reduction in 2025 revenue estimates and a 2% drop in projected earnings per share. 

The downgrade reflects a cautious stance as the market waits for incoming CEO Anders Svensson to articulate his vision for Hexagon’s post-spin-off trajectory.

While Hexagon has increased its share of recurring revenue, now at 41%, the company’s reliance on hardware sales—approximately 38% of total revenue—exposes it to cyclical downturns. 

Initially, Stifel had projected a 6.5% growth in hardware revenue for 2025, but that figure has now been revised downward to 5.2% following a 7% decline in 2024.

Despite these concerns, Hexagon’s long-term fundamentals remain robust. The company continues to benefit from its exposure to high-growth industries and a strong software portfolio. 

However, with limited short-term upside and uncertainty surrounding the spin-off’s execution, Stifel advises investors to take a wait-and-see approach. 

The stock’s recent performance has also factored into the downgrade, with shares gaining 18.8% over the past three months, suggesting that much of the near-term potential is already priced in.