Morningstar | METSO Updated Forecasts and Estimates from 20 Nov 2018
No-moat Metso reported stellar sales (up 18% compared with the year-ago period) and healthy order intake (up 8% year on year), mainly driven by large mining equipment orders booked during the third quarter and firm demand for aggregates equipment in China and India. Despite a negative sales mix, as a result of impressive equipment sales (up 30% in the quarter), Metso's adjusted EBITDA margins increased by 580 basis points, owing to operational leverage and cost control. Order inflow for Metso over the first nine months was strong, rising by 13%, while the order backlog currently sits at EUR 1.7 billion, up from EUR 1.4 billion at year-end 2017. We are updating our estimates to reflect the latest developments, which could result in a modest increase (less than 5%) in our fair value estimate of EUR 27 per share, as reported revenue and orders received exceeded our estimates. Even after the potential increase to our fair value estimate, we believe the shares are currently fairly valued.The company's profitability in 2018-19 will likely benefit from growth in the higher-margin services business. Net sales for the services business amounted to EUR 442 million, up 10% versus the prior year. We are happy with this result, as strong development of Metso's services business helps to offset revenue and margin swings in the company's capital equipment offerings. A large installed base of machines drives fairly consistent revenue from spare and wear parts, as mining and construction technology in particular are subject to heavy wear over a machine's life cycle. Despite Metso's installed base, we don't believe that switching costs are high enough to justify an economic moat.
Metso is a global services, products and systems provider. Co. serves its customers in mining, oil and gas as well as aggregates industries. Co. serves also some other process industries, such as pulp and paper industry. Co.'s offerings to the mining industry include grinding mills, mill linings and grinding media; as well as crushers and screens. Co.'s offerings to the aggregates industry include crushers; as well as screens, feeders and conveyors. Co.'s offerings to the oil and gas industry include control valves, on-off valves; intelligent safety valves; intelligent valve controllers and limit switches; intelligent field services; spare and wear parts; as well as performance services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.