Nibe’s Second Quarter Report: What to Expect
As the final company in the OMXS30 index to release its second quarter report this Friday, August 16th, Nibe’s stock performance has been less than stellar, with a nearly 40% decline in 2024. Looking back to the price peak at the beginning of 2021, the decline is almost 70%, bringing the stock back to pre-pandemic levels. The challenging conditions for growth companies, especially those with a clear ESG focus, have led to a revaluation of Nibe’s stock.
Factors such as increased competition in the heat pump sector, with companies like Harald Mix’s Aira making significant investments, have also contributed to the devaluation of Nibe. However, the most significant explanation for the recent downturn lies in the current financial landscape. High interest rates affecting housing construction and consumer spending, inventory reductions by distributors, low electricity and gas prices, and unclear government subsidies have all contributed to a sharp decline in heat pump production in Europe.
In the first quarter of this year, Nibe’s revenue fell by 19%, with a 24% organic decline, and operating profit plummeted by over 70% to a margin of just over 5%, compared to 15% in the same quarter last year. Excluding one-off items related to cost-saving programs, Nibe experienced a significant loss in the quarter.
Analysts expect a slight recovery in the upcoming quarter, with a projected revenue decline of 16% and an operating margin of 6.5%, according to Factset’s average forecasts. This recovery is expected to continue in the third and fourth quarters, with margins reaching double digits next year. However, despite the projected earnings rebound, Nibe’s P/E ratio for next year is around 24, indicating a relatively high valuation for a company prone to deep profit slumps during market downturns.
Analysts’ recommendations for the stock reflect this uncertainty, with the majority now either negative or neutral, compared to previous neutral or positive ratings. Only four out of thirteen firms covering the stock currently recommend buying, despite the sharp decline in price.
The median target price of around 50 SEK suggests a potential recovery, as it has gradually decreased from 120 SEK in the past year, now standing about 20% above the current price. The substantial increase in short positions, with over 10% of capital now being shorted, adds further complexity to the situation.
When the previous report was released in mid-May, the stock rose by 8% on the day of the announcement, only to fall by 12% the following day due to downgrades from foreign analysts. The upcoming half-yearly report release on Friday at 08:00 CET, followed by a conference call with CEO Gerteric Lindquist at 11:00 CET, will provide further insights into Nibe’s performance.
Analysis:
In summary, Nibe’s upcoming report will shed light on the company’s financial performance amidst challenging market conditions. Factors such as increased competition, economic uncertainties, and fluctuating demand for heat pumps have impacted the stock’s valuation and analyst recommendations. Investors should closely monitor the results and management’s outlook to assess the future prospects of Nibe’s stock and potential investment opportunities.
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