SKF's Earnings Are Volatile Through the Cycle, but Its Moat Draws a Line Under Margin Contraction
We have decreased our fair value estimate for narrow-moat SKF to SEK 185 from SEK 195 per share, as we are modelling in a slight dip in demand for 2019 versus our previous forecast of modest growth. Demand for SKF's products is tied to the business cycle, which means the company's earnings are volatile; however, unlike a commodity producer, SKF is able to hold pricing through the cycle. In addition, a portion of demand for the company's product has some buffer due to a replacement cycle as well ...AB SKF is the parent company of the SKF Group, which supplies products, solutions and services within rolling bearings, seals, mechatronics, services and lubrication systems. Services include technical support, maintenance services, condition monitoring, asset optimization, engineering consultancy and training. Co.'s business areas are: SKF Industrial Market - Strategic Industries, which includes bearings and bearing accessories and lubrication systems; SKF Industrial Market - Regional Sales and Service, which develops SKF Solution Factory facilities providing engineering capability; and SKF Automotive, which develops and manufactures bearings, seals and related products and services.
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