Shares in Swedish machinery and garden equipment maker Husqvarna (HUSQB.SE) are down nearly 6% today after analysts at SEB Research pointed to structural problems at the company and downgraded the outlook for the company's valuation.
- In September, Husqvarna warned of falling sales in the face of declining consumer activity, indicated that it expected a 5% annual decline in comparable sales. SEB, which analyzes the market for Scandinavian companies, recognized structural challenges at Husqvarna and downgraded its recommendation to 'sell'.
- The target price for Husqvarna shares in the report was lowered to SEK 57. The company believes that the company will experience problems on its solutions addressed to lawn mowing, and costly problems, related to the transition from gasoline engine solutions, to electric batteries.
- Analysts pointed out that Husqvarna dealers are losing ground in a highly competitive market, depriving the company of an important part of its so-called business moat. SEB lowered forecasts for operating profit in 2025-26 have been lowered by 22-34% and does not assume a significant recovery on the stock, after reaching annual lows. Husqvarna expects operating profit 'at a profitable level' this year and is betting on higher promotional activity.
The company's Chair of The Board, Thomas Johnston, declined re-election and will probably step down in 2025. According to Husqvarna's Nomination Committee, Johnston can be replaced by Torbjörn Lööf, with many years of experience at IKEA. SEB's assessment of the stock's value implies nearly 10% downside potential from current levels. The stock is testing the 2022 minimums today, and a bottom breakout from this zone could indeed lead to pressure, even to erase the 2020 upward momentum altogether. Higher interest rates, energy costs and high households buying activity from 2020 to 2022 mix indicates that demand for garden equipment (leading to higher consumer 'inventories') may be still under pressure.
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Source: xStation5
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