North American Construction And Digital Access Will Redefine Markets

Key Takeaways

• Growth in non-residential construction and rising demand for digital access solutions are fueling resilient revenue and margin expansion.
  
• Targeted acquisitions, operational efficiencies, and service-driven recurring revenue streams are reducing cyclicality and supporting long-term earnings quality.
  
• Persistent weakness in key markets, integration challenges, and slow digital adoption threaten revenue growth, margins, and long-term earnings stability amid rising competitive and geopolitical pressures.

Catalysts

Provides door opening and access products for the institutional, commercial, and residential markets.

• Continued strong growth in non-residential construction activity across key markets (especially in North America and Europe), driven by accelerating infrastructure development and sustained investment in institutional sectors such as healthcare, education, and data centers, is supporting resilient demand for ASSA ABLOY's access solutions-providing visibility for top-line revenue growth.
  
• The increasing adoption of digital access, smart building solutions, and IoT-driven access control is positively impacting ASSA ABLOY's high-margin Global Technologies and digital product lines, as evidenced by double-digit growth in the specification business, continued digital hardware rollouts, and strategic partnerships (e.g., SKIDATA x Samsung), supporting future revenue mix shift and margin expansion.
  
• Expansion in high-value service, perimeter security, and software-driven recurring revenue streams-bolstered by targeted acquisitions in technology and emerging markets (e.g., TeleAlarm, Kingspan)-is boosting EBITDA margin stability and improving long-term earnings quality through greater revenue diversification and reduced cyclicality.
  
• Ongoing operational efficiencies from lean manufacturing, automation, and transformation programs are driving significant operating leverage (53% in Q2) and continued savings, with further upside potential as volume recovers, directly supporting net margin improvement.
  
• Order momentum and pipeline growth in logistics, industrial, and perimeter security verticals (especially in Entrance Systems)-together with a gradual residential recovery in markets like Sweden and New Zealand-point to a near
• and mid-term uptick in organic sales growth, while strong execution keeps both EBITA and EBIT margins at the upper end of the company's historical range.

ASSA ABLOY Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming ASSA ABLOY's revenue will grow by 5.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.5% today to 11.6% in 3 years time.
• Analysts expect earnings to reach SEK 20.6 billion (and earnings per share of SEK 18.56) by about September 2028, up from SEK 14.5 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.2x on those 2028 earnings, down from 25.2x today. This future PE is lower than the current PE for the GB Building industry at 25.9x.
• 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 6.51%, as per the Simply Wall St company report.

ASSA ABLOY Future Earnings Per Share Growth

Risks

• Sustained weakness and lack of recovery in the residential construction segment, particularly in key markets such as the US, Europe, and Greater China, may lead to stagnating or declining revenues in large portions of ASSA ABLOY's portfolio, impacting both top-line growth and net margins.
  
• Heightened geopolitical tensions and rising import tariffs, especially impacting Brazil, Mexico, and the US markets, risk disrupting supply chains and increasing input costs, which could compress margins if not fully offset by price increases.
  
• A slower-than-expected shift to digital and smart access solutions-despite growth in Global Tech-exposes ASSA ABLOY to competitive risks from more agile or tech-focused security solution providers, which may erode market share and put future revenue growth at risk.
  
• Integration challenges and margin dilution from ongoing acquisitions (such as SKIDATA and Level Lock) could hamper realization of expected synergies and efficiency gains, potentially increasing operating costs and putting pressure on consolidated net margins and earnings quality.
  
• Prolonged softness in China and delays in recovery in other emerging markets, compounded by long industry product lifecycles and slowing new-build rates in developed regions, may dampen replacement and upgrade demand, limiting recurring revenue streams and impacting long-term earnings stability.

Valuation

• The analysts have a consensus price target of SEK356.0 for ASSA ABLOY 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 SEK407.0, and the most bearish reporting a price target of just SEK310.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK176.9 billion, earnings will come to SEK20.6 billion, and it would be trading on a PE ratio of 23.2x, assuming you use a discount rate of 6.5%.
• Given the current share price of SEK329.8, the analyst price target of SEK356.0 is 7.4% 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.