Morningstar | STERV Updated Forecasts and Estimates from 10 Apr 2019
No-moat Stora Enso reported fourth-quarter EBIT of EUR 271 million, down 3% from 2017 and below our estimate, which was already well below consensus. However, some EUR 40 million in lost EBIT can be traced to operating issues at six different mills in the quarter, which should be temporary. Excluding those costs would bring EBIT much closer to consensus. With shares trading flat intraday, the market has given Stora a pass on the weak headline number. We don’t expect to make a material change to our EUR 9.50 fair value estimate. At current levels, the shares look moderately overvalued.While we can accept the operational issues in the fourth quarter as temporary, we have a more ominous outlook for 2019. Stora’s guidance states 2019 should be largely in line with 2018, provided that current trading conditions do not significantly change. We believe market conditions are deteriorating. Consequently, our 2019 forecast calls for a meaningful decline in EBIT. The tone of Stora’s guidance discussion indicates more concern about trading conditions than the headline statement, in our opinion. The company has launched a cost-saving program due to the possibility that markets will become weaker and a notable risk that global trade could shrink materially. Stora expects annual cost savings of EUR 120 million and capital expense savings of EUR 50 million. While some impact is expected to be visible in 2019, the full impact of the program is not expected to be achieved until the end of 2020.
Stora Enso is a provider of renewable solutions in packaging, biomaterials, wooden constructions and paper on global markets. Co.'s reporting segments are: Consumer Board, which develops and provides consumer packaging boards for printing and packaging applications; Packaging Solutions, which develops fibre-based packaging; Biomaterials, which provides a variety of pulp grades for paper, board, tissue, textile and hygiene product producers; Wood Products, which provides wood-based solutions for building and housing; Paper, which provides paper solutions for print media and office use; as well as Other, which includes Co.'s shareholding in the energy company, Pohjolan Voima.
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.
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