Gea Shares Increase Following Improved Guidance

GEA Group Aktiengesellschaft experienced a rise on Friday following an upward revision of its earnings guidance for the fiscal year 2024, indicating a stronger-than-anticipated financial performance.

The German engineering company, known for its process technology across sectors such as food, chemicals, and pharmaceuticals, reported robust results for the first nine months of 2024, with notable momentum in the third quarter.

Consequently, GEA projects its EBITDA margin, excluding restructuring costs, to fall between 15.4% and 15.6% for the year, an increase from the prior forecast of 14.9% to 15.2%.

Analysts at RBC Capital Markets highlighted these developments, noting the ambitious margin targets discussed at GEA’s recent capital markets day, projecting an EBITDA margin rise to 17-19% by 2030 from the current approximately 14.2%. They remarked that these targets exceed sell-side expectations, which remain skeptical.

This marks the second adjustment of earnings outlook by GEA this year, driven by consistent growth in profitability and improved cost efficiency. The company’s organic revenue growth forecast stands steady at 2.0% to 4.0%, with a return on capital employed projected between 32% and 35%.

The enhanced profitability, particularly in the core business, has bolstered investor confidence, reflected in the stock’s uptick following the announcement. GEA’s CEO, Stefan Klebert, remarked on the encouraging order intake resulting from strong base business performance and emphasized the gradual implementation of the new “Mission 30” strategy aimed at further boosting profitability.

While Jefferies maintains a positive outlook on the revised guidance, it also cautions against potential risks. These include weaknesses in GEA’s dairy segment, challenges in sustaining the business turnaround, difficulties in price adjustments, and continued inflationary pressures.