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Cargotec (Sell, TP: EUR39.00) - Sales beat, but weak drop-through

Cargotec delivered impressive sales and order intake growth, with Hiab and Kalmar beating Q1 estimates. However, sales had a lower incremental margin, and adjusted EBIT was in line with consensus. Therefore, we do not expect a significant increase in consensus for 2018e. We see a cyclical downturn for Hiab, more than offsetting the MacGregor recovery in 2019–2020e. We forecast profitability pressure for Kalmar from reducing project workload. We reiterate SELL, and have raised our target price ...

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Cargotec (Sell, TP: EUR38.00) - Not enough growth

We have downgraded Cargotec to SELL (HOLD) ahead of Q1 results (due 7:30 CET on 24 April) with a EUR38 (48) target price. We see a cyclical downturn for Hiab, more than offsetting MacGregor recovery in 2019e–2020e. We forecast profitability pressure for Kalmar from reducing project workload. We expect Q1 order intake and EBIT to fall below consensus.

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Cargotec (Hold, TP: EUR48.00) - Lack of clear growth path

Cargotec lacks a clear growth path, in our view, as the port automation trend lacks urgency, Hiab is closing in on cycle peak, and MacGregor faces a slow recovery. The share is trading close to mid-cycle valuation, which we consider fair for the current outlook. We reiterate our HOLD recommendation and EUR48 target price.

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Cargotec (Hold, TP: EUR48.00) - FX and supplier constraints

We expect Q4 adj. EBIT to miss consensus by 8% (results due at 07:30 CET on 8 February). We are also 4% below consensus on 2018e adj. EBIT, as we see lower sales at Kalmar and Hiab. The shares have underperformed peers YTD, we believe because Cargotec will come close to missing the 2017 full-year guidance. As management has not pre-announced any Q4 figures, we see limited downside risk in the short-term and maintain our HOLD recommendation with a new target price of EUR48 (51).

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CMD comments

Cargotec's new financial targets were updated last week, ahead of the CMD. The actual CMD did not change our view on the company, and our estimates are unchanged. Our key takeaways: 1) The service and software revenue growth target of EUR1.5bn is based largely on broad-based improvements in traditional after-market business; 2) Hiab's margins should be under FX pressure in 2018e, as we have suspected; and 3) Large automation orders for Kalmar look increasingly unlikely before 2018e. We reiterat...

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Hiab’s US earnings at risk

Following a change of analyst and the announcement of new financial targets ahead of the 12 September CMD, we have updated our estimates. We acknowledge Kalmar’s growth prospects but expect better entry points ahead, as Hiab’s strong margins are increasingly at risk from the weaker USD and greater competition for the truck-mounted forklift business. We reiterate our HOLD recommendation but have trimmed our target price to EUR52 (53).

Mixed result

Cargotec (CGCBV FH, Hold) - (15 pages)