Global Medical Demand Will Unlock Future Markets

Key Takeaways

• Strengthened demand for advanced medical and safety products, along with digital solution adoption, is set to drive steady, long-term revenue and margin growth.
  
• Operational consolidation and strategic pricing are improving cost efficiency and helping offset headwinds, supporting stable earnings and sustainable profitability.
  
• Persistent tariff pressure, currency volatility, and challenging market conditions threaten margin expansion and profitability, while internal efficiencies and foreign growth remain difficult to realize.

Catalysts

Operates as a medical and safety technology company worldwide.

• Robust global order intake, particularly in advanced medical equipment like ventilators and anesthesia machines, signals rising demand fueled by demographic shifts and increased healthcare infrastructure spending; this should drive top-line revenue acceleration as backlogs convert to sales in H2 2025 and beyond.
  
• Successful launch of the interoperable Smart Care Package, leveraging global digitalization and connectivity trends, positions Drägerwerk to capture share in the growing market for integrated, intelligent monitoring solutions, supporting long-term revenue growth and margin expansion.
  
• Ongoing consolidation of Neonatal Care operations into a single, optimized site will reduce fixed costs and operational complexity, improving cost efficiency and scalable earnings by lifting net margins after a short payback period.
  
• Strategic price adjustments, especially in the safety division, and the gradual repricing of medical contracts as existing agreements expire, offer a forward path to offset currency and tariff headwinds, supporting the company's commitment to margin improvement and sustained profitability.
  
• Heightened global focus on pandemic preparedness, defense, and occupational safety strengthens recurrent demand for Drägerwerk's critical care and safety products, underpinning long-term, stable revenue streams and recurring earnings growth.

Drägerwerk KGaA Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Drägerwerk KGaA's revenue will grow by 4.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.0% today to 3.7% in 3 years time.
• Analysts expect earnings to reach €141.0 million (and earnings per share of €7.77) by about July 2028, up from €99.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €172.8 million in earnings, and the most bearish expecting €122 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.6x on those 2028 earnings, down from 13.3x today. This future PE is lower than the current PE for the GB Medical Equipment industry at 23.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.88%, as per the Simply Wall St company report.

Drägerwerk KGaA Future Earnings Per Share Growth

Risks

• Persistent tariff headwinds, particularly from newly announced 15% U.S. tariffs, are expected to create a ~€25 million annual net negative impact that cannot be meaningfully offset in the near term due to contractual constraints in the medical business, directly weighing on net margins and operating profit.
  
• Exposure to foreign currency volatility, with recent euro appreciation and devaluation of third-country currencies (such as Mexican peso and Indonesian rupiah), resulted in a roughly €20 million earnings headwind and presents ongoing risks to revenue and earnings if adverse FX movements persist.
  
• The company's margin improvement relies heavily on ambitious internal cost management, favorable product mix, and backend-loaded seasonality; any failure to achieve strong H2 sales or cost savings could result in EBIT margins remaining at or below the lower end of guidance, impacting annual profitability.
  
• Market uncertainty in China, including potential exclusion from government tenders and cooling growth in Q2, signals risk to expansion in the APAC region and could slow overall revenue growth if geopolitical tensions escalate or domestic market volatility increases.
  
• Drägerwerk's complex structure and high fixed costs-highlighted by ongoing site consolidation efforts-may continue to constrain scalability and delay margin expansion, especially given contraction in core mature markets and heightened competitive and pricing pressures.

Valuation

• The analysts have a consensus price target of €76.6 for Drägerwerk KGaA 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 €96.0, and the most bearish reporting a price target of just €63.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €3.8 billion, earnings will come to €141.0 million, and it would be trading on a PE ratio of 11.6x, assuming you use a discount rate of 5.9%.
  
• Given the current share price of €71.0, the analyst price target of €76.6 is 7.3% 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.