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Investing.com -- UBS cut Georg Fischer AG to “sell” from “buy” and slashed its price target to CHF 47 from CHF 65, warning that sluggish demand in construction and general industrial markets will likely persist despite the company’s cost-efficiency measures.
Shares of the Swiss industrial manufacturer were down 5.7% at 06:28 ET (11:28 GMT).
UBS said it expects 5-10% downside risk to consensus estimates, citing muted data from building permits and purchasing managers’ indices (PMIs).
“Recent building permits are not showing material evidence of a construction end market (c40% of earnings) rebound, PMIs remain subdued and self help via cost efficiencies (our takeaways from the CMD; details) is not a P&L game changer,” the brokerage said.
The brokerage forecast organic sales growth of 2% year-on-year in 2026, well below the 4% consensus, and an EBIT margin of 10.4% versus consensus expectations of 11.9%, according to Visible Alpha data cited in the note.
UBS now expects core EBIT of CHF 331 million for 2026, compared with CHF 378 million estimated by consensus.
The Zurich-based brokerage also trimmed 2026-2028 earnings-per-share estimates by 2-8% and raised its weighted average cost of capital by 50 basis points to reflect rising earnings volatility risks.
The stock trades at roughly 23.5× 2025E P/E and 21.5× 2026E P/E, which UBS said is at the higher end of Swiss small- and mid-cap industrials.
Georg Fischer, a diversified industrial group specializing in piping and flow solutions, casting, and machining systems, derives about 40% of its earnings from construction, 15-20% from general industry, 25% from infrastructure, and 15% from semiconductors, according to the report. UBS said weakness in residential and non-residential construction across the U.S. and Europe continues to weigh on performance. “We see increasing risks its end markets remain subdued for longer and consensus is too optimistic,” it added.
The brokerage noted that UBS’s short-cycle indicator “marks the lowest level since February this year and indicates a slight downward trend,” consistent with deteriorating sentiment among Eurozone firms.
A UBS Evidence Lab survey of 540 companies found that corporate capital-expenditure plans fell to a two-year low, further signaling muted industrial spending.
While Georg Fischer’s long-term strategy is anchored in its flow solutions division, which has 75% sales exposure to water management, recycling, treatment, and scarcity, UBS said it remains below company guidance.
“We think 2026E is unlikely to provide a large step towards its mid term targets being +4-6% organic sales (vs UBS +3% and cons. +4%) with an EBIT margin of 13-15% (UBSe c11%, consensus c13-14%),” the analysts said.
UBS said growth in the semiconductor segment may offset some weakness in 2026, with the division projected to expand around 10% after a 5-10% decline in 2025. Still, it described the business as “lumpy and volatile.”
The brokerage added that Georg Fischer has “a good business model and long term prospects” but sees limited “pricing power amid fragile end markets.” It added, “We downgrade the stock to Sell and think there could be better times for a revisit.”