Schaeffler shares drop after Q3 miss, costly restructuring plan weighs on outlook
Investing.com -- Shares of Schaeffler (ETR:SHA0 ) fell after the company reported third-quarter earnings that missed market expectations and announced a substantial restructuring plan focused on its European operations.
At 8:34 am (01:34 GMT), Schaeffler was trading 6.3% lower at €4.35.
Schaeffler’s quarterly revenue of €3.96 billion came in 1% below consensus forecasts, while adjusted EBIT landed at €187 million, a 10% shortfall compared to estimates, bringing the company’s EBIT margin to 4.7%—600 basis points lower than expected.
The results flagged a particularly weak performance in Schaeffler’s Automotive Technologies segment, where sales dropped by 2.5% year-over-year to €1.68 billion, yielding a narrow 2.3% EBIT margin.
As per analysts at UBS, increased costs associated with scaling Schaeffler’s E-mobility projects weighed heavily on profitability in this area.
Meanwhile, Vehicle Lifetime Solutions, the company’s aftermarket division, saw an EBIT margin of 16.4% on €644 million in revenue, boosted by steady demand in maintenance services.
However, this strength was offset by struggles in Schaeffler’s Bearings & Industrial Solutions segment, which reported a 4.5% margin, indicating what UBS analysts referred to as a “trough” in the segment’s performance.
In a bid to stabilize long-term earnings, Schaeffler introduced a new restructuring program focused on consolidating its European operations over the next few years.
The plan, estimated to cost around €580 million, aims to achieve recurring EBIT benefits of €290 million annually starting in 2029.
However, UBS noted that the program would likely pressure cash flow in the short term, contributing to investor concerns that tempered enthusiasm for the stock.
UBS maintained a “neutral” rating on Schaeffler, advising that while the restructuring might enhance profitability over time, the immediate financial impacts and lack of upward momentum could continue to weigh on share performance.
“Overall, a weak quarter and we expect further pressure on cash flow and balance sheet leverage going forward,” said analysts at J.P. Morgan in a note.
Source: Investing.com
