Expanding Orders In Europe And North America Will Shape Trends

Key Takeaways

• Strategic acquisitions and focus on sustainable technologies strengthen positioning for premium pricing and support alignment with global decarbonization and regulatory trends.
  
• Higher-margin service and aftermarket growth, coupled with operational improvements and digital solutions, underpin margin expansion and long-term revenue potential.
  
• Weak sales mix, rising costs, inventory inefficiencies, and regional dependence are straining margins, cash flow, and increasing financial risks amid uncertain growth prospects.

Catalysts

Provides technologies, end-to-end solutions, and services for the aggregates, minerals processing, and metals refining industries in Europe, North and Central America, South America, the Asia Pacific, Greater China, Africa, the Middle East, and India.

• Uptake of new equipment orders, particularly in Europe and North America, signals confidence among customers in infrastructure and urbanization-driven end markets-suggesting revenue growth potential as backlogs are converted to sales in coming quarters.
  
• Successful rollout of the new ERP system (covering 80% of operations by year-end) is expected to enhance operational efficiency, inventory management, and margin performance-supporting improved earnings and cash flow as temporary costs roll off.
  
• Strong and rising order intake in Minerals services (+€160 million in H1), combined with normalization of higher-margin aftermarket mix in H2, indicates faster growth and margin expansion for recurring service revenues versus capital equipment-positively impacting net margins and earnings quality.
  
• Strategic acquisitions (e.g., Swiss Tower Mills for energy efficient grinding, screening technologies in China, recycling tech in Finland) strengthen Metso's portfolio in sustainable and eco-efficient processing technologies, aligning with stricter environmental regulations and the global decarbonization agenda-positioning the company to capture premium pricing and grow top-line revenues.
  
• Large project pipeline in battery metals (copper, gold, lithium) and expectation of order conversion in H2 and 2026, combined with robust demand for digital and automation solutions, leverages global trends toward electrification and digital transformation in mining, underpinning future order intake and long-term revenue growth.

Metso Oyj Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Metso Oyj's revenue will grow by 6.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.3% today to 11.5% in 3 years time.
• Analysts expect earnings to reach €672.3 million (and earnings per share of €0.81) by about August 2028, up from €446.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €753 million in earnings, and the most bearish expecting €585 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.1x on those 2028 earnings, down from 20.2x today. This future PE is lower than the current PE for the FI Machinery industry at 22.5x.
• Analysts expect the number of shares outstanding to grow by 0.05% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.15%, as per the Simply Wall St company report.

Metso Oyj Future Earnings Per Share Growth

Risks

• Declining services sales and an unfavorable sales mix in both the Aggregates and Minerals segments have negatively impacted margins and profitability; if this trend persists due to increased reliance on lower-margin products or weak equipment utilization, it could put sustained pressure on revenues and net margins.
  
• Ongoing temporary and higher-than-expected costs related to the ERP implementation and future rollouts may continue to burden operating earnings and inflate SG&A expenses, delaying any margin recovery and impacting net income.
  
• Elevated inventory-to-sales ratios (currently at 38% versus historical averages closer to 28%) and headwinds in working capital management signal inefficient capital use; this can tie up cash flows and increase the risk of write-downs, negatively affecting free cash flow and earnings quality.
  
• Rising net debt (up €240 million year-on-year) and an increased reliance on external funding, if coupled with only flat or minimal revenue growth, may heighten financial risk and increase net financial expenses, weighing on future profits.
  
• The company highlights dependence on the North American and European aggregates markets, so any demand shocks, geopolitical trade barriers, or delayed infrastructure cycles-especially tariff-related disruptions or slowing equipment utilization-could result in revenue stagnation or contraction and continued margin compression.

Valuation

• The analysts have a consensus price target of €11.924 for Metso Oyj 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 €14.0, and the most bearish reporting a price target of just €9.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €5.8 billion, earnings will come to €672.3 million, and it would be trading on a PE ratio of 18.1x, assuming you use a discount rate of 7.1%.
• Given the current share price of €10.9, the analyst price target of €11.92 is 8.6% 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.