Morningstar | Alstom Reports Flat Sales Growth and Lower Order Intake in 1Q; Shares Fairly Valued
No-moat Alstom reported no surprises in its first-quarter results, with flat year-over-year revenue and a 39% decline in orders. Revenue was up 2% on a reported basis and 1% organically to EUR 2.1 billion, driven mainly by regional train contracts and the Amtrak contract in the United States. The systems division's decrease in revenue was offset by good performance in rolling stock and signaling. The main orders during the quarter include close to 50 Coradia trains for several European countries and 32 DT5 metros for Germany. The decline in orders is explained by an exceptional performance in the same quarter of 2018, when the company signed a massive contract to provide driverless light metro systems for Montreal. The EUR 40 billion existing backlog provides good visibility for future revenue, supporting our mid-single-digit revenue growth estimate in the following years. We maintain our EUR 42 fair value estimate and believe the shares are fairly valued.Rolling-stock orders and sales were up 117% and 9%, respectively, because it won contracts for Coradia trains in Germany, France, Italy and the Netherlands, and the beginning of deliveries in several regions such as Emilia Romagna in Italy. Additionally, the firm expects some working capital volatility in 2019 because of the ramp up of rolling-stock contracts.
The order intake for systems and services were significantly lower compared with the same quarter in 2018, with sales down 12% and 6% respectively. In signaling, the company was awarded contracts in Europe and Asia-Pacific, and sales were up 9% year over year.
Further, the company completed the distribution of the EUR 5.5 per share special dividend derived from the sale of the energy joint ventures to General Electric.
Alstom serves the power generation and transmission markets, and rail transport market. Co.'s activities are divided into four sectors: the Thermal Power Sector (Co. offers power generation solutions using gas or coal to services including plant modernization, maintenance and operational support); the Renewable Power sector offers EPC solutions, turbines and generators, control equipment and maintenance for Hydropower and Wind power activities; the Grid Sector designs and manufactures equipment and turnkey solutions to manage power grids and transmit electricity from the power plant to the large end-user; and the Transport Sector provides rail transport products, systems and services.
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