Local Manufacturing And Emerging Markets Will Boost Sustainable Packaging Expansion

Key Takeaways

• Expansion in emerging markets and investments in local capacity strengthen revenue growth and resilience to global risks.
  
• Focus on innovation, automation, and recurring services drives higher margins and secures long-term competitive advantage.
  
• Rising competition, supply chain pressures, and dependence on the beverage sector expose Krones to market share loss, margin compression, and volatile earnings amid regulatory and geopolitical headwinds.

Catalysts

Engages in the planning, development, and manufacture of machines and lines for the production, filling, and packaging technology for the food and beverage industry in Germany and internationally.

• Continued strong order intake and resilience in large, fast-growing emerging markets (Africa, Middle East, Asia Pacific) are fueling top-line growth as urbanization and rising populations drive substantial demand for packaged beverages and food. This sustained demand supports robust revenue growth and reduces reliance on any single geographic region.
  
• Significant investments in local manufacturing capacity and supply chain flexibility, especially in key regions like the U.S., China, and India, better position Krones to capture business amid global economic uncertainty and potential trade barriers. This mitigates operational risk and underpins future revenue and margin stability.
  
• Customer shift towards high-speed, automated, and technologically advanced packaging lines supports Krones’ core strengths, leading to higher-value order mix and improved price realization, which positively impacts both revenue and gross margins.
  
• Firm strategy to grow aftermarket and recurring service revenues—such as digital solutions, maintenance, and spare parts—increases high-margin, stable cash flow, providing earnings stability and supporting net margin improvement over time.
  
• Sustained innovation in sustainable packaging machinery (recyclable, lightweight, and energy-efficient equipment) aligns with regulatory and consumer demand trends, enabling Krones to capture premium contracts and maintain competitive differentiation, supporting both revenue and margin expansion.

Krones Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Krones's revenue will grow by 6.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.2% today to 6.4% in 3 years time.
• Analysts expect earnings to reach €424.6 million (and earnings per share of €12.67) by about May 2028, up from €286.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.5x on those 2028 earnings, down from 15.9x today. This future PE is lower than the current PE for the GB Machinery industry at 17.7x.
• Analysts expect the number of shares outstanding to decline by 0.16% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.55%, as per the Simply Wall St company report.

Krones Future Earnings Per Share Growth

Risks

• Krones faces increased competition from lower-cost machinery manufacturers in Asia, particularly China, which could erode global market share and put pressure on contract profitability and revenue growth over the long term.
  
• There is notable risk of rising material and labor costs, as well as complex or disrupted supply chains, which may compress net margins if cost inflation cannot be offset through price increases or operational efficiencies.
  
• Heightened anti-plastic sentiment and regulatory pressure around single-use plastics may reduce demand for traditional beverage packaging machinery, limiting the long-term addressable market and potentially causing slower revenue growth.
  
• Order postponements and investment hesitancy, especially in the U.S. due to tariff uncertainty and broader geopolitical tensions, introduce revenue volatility and could negatively impact order intake and earnings stability.
  
• Heavy reliance on the beverage sector, with only moderate diversification into other segments, makes Krones’ financial performance especially vulnerable to cyclical downturns or structural shifts in beverage consumption, risking greater revenue volatility.

Valuation

• The analysts have a consensus price target of €157.5 for Krones based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €195.0, and the most bearish reporting a price target of just €137.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €6.6 billion, earnings will come to €424.6 million, and it would be trading on a PE ratio of 13.5x, assuming you use a discount rate of 5.6%.
  
• Given the current share price of €144.6, the analyst price target of €157.5 is 8.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.