SKF B: Autos Spin-Off And New Steel Development Will Shape Future Outlook

Analysts have modestly reduced their fair value estimate for AB SKF to roughly SEK 267 from about SEK 267 previously, reflecting slightly lower revenue growth and margin assumptions, as well as a mixed but still constructive range of updated price targets from the Street.

Analyst Commentary

Recent Street research presents a mixed but generally constructive view on AB SKF, with price targets clustering in the mid to high SEK 200s and ratings ranging from Neutral to Buy. The latest revisions highlight both improving end market trends and lingering execution and cyclical risks that could influence how quickly the company closes the gap to perceived fair value.

Bullish Takeaways

• Bullish analysts point to the upgraded Buy rating and higher price targets around SEK 260 to SEK 280 as evidence that the shares still offer upside relative to the current trading range, particularly if earnings growth accelerates.
• Several updates emphasize an expected acceleration in sales and profit growth, underpinned by improving European short cycle momentum, which could support a re-rating if margins expand as anticipated.
• The planned spin-off of the Autos business by 2026 is viewed positively, with bullish analysts arguing that removing a structurally weaker, more volatile unit could simplify the equity story and improve group-level return on capital.
• Incremental target raises, even from more cautious voices, suggest that execution on cost control and portfolio actions is being recognized and that downside to earnings estimates is viewed as limited in the near term.

Bearish Takeaways

• Bearish analysts focus on recent target cuts toward the SEK 232 to SEK 260 range, arguing that prior expectations embedded too much optimism on margin recovery and top-line growth, which may be harder to achieve in a choppy macro backdrop.
• The persistent Neutral stance from several corners signals concern that valuation already discounts a substantial portion of the anticipated cyclical upturn, which may limit the risk/reward profile until there is clearer evidence of sustained volume and pricing leverage.
• The ongoing drag from the Autos segment remains a key overhang until the 2026 spin-off is completed, with worries that weaker mix and margin dilution could restrain group profitability over the next few reporting periods.
• Cautious analysts also highlight execution risk around portfolio restructuring and the timing of the cycle recovery, warning that any slip in delivery versus guidance could lead to renewed pressure on both earnings estimates and the stock’s valuation multiple.

What's in the News

• SKF will present a broad suite of clean technologies and circular solutions at COP30, where its remanufacturing offering will be honored as a Sustainable Business COP Best Case for extending product lifecycles and cutting CO2 emissions (Key Developments).
• The company has developed ARCTIC15, a new temperature resistant, corrosion tolerant steel for aeroengine bearings. This enables higher power density and efficiency in next generation jet engines targeting 20 to 25% lower fuel use and emissions (Key Developments).
• SKF is launching The Patent Bay, a platform that makes selected sustainability focused patents freely available to accelerate global collaboration and innovation at a time of record patent filings (Key Developments).
• Management issued guidance for fourth quarter 2025, expecting organic sales to be relatively unchanged year over year. They also flagged a negative currency impact of around SEK 650 million on operating profit versus the prior year period (Key Developments).
• SKF announced the relocation of production from its Tortuguitas plant in Argentina, discontinuing manufacturing at the site and affecting around 145 employees, while maintaining a local commercial presence to serve customers (Key Developments).

Valuation Changes

• Fair Value Estimate has edged down slightly to around SEK 267 from approximately SEK 267 previously, reflecting marginally softer assumptions despite the headline figure appearing broadly unchanged.
• Discount Rate has fallen slightly to about 6.60 percent from roughly 6.64 percent, implying a modestly lower required return and a slightly more supportive backdrop for valuation.
• Revenue Growth has been reduced meaningfully to about 10.4 percent from roughly 12.0 percent, signaling a more cautious outlook on the top line trajectory over the forecast period.
• Net Profit Margin has been trimmed slightly to around 9.45 percent from about 9.51 percent, indicating a small downgrade to medium term profitability expectations.
• Future P/E has risen marginally to roughly 16.4x from about 16.4x, which is consistent with a slightly higher valuation multiple being applied despite more conservative growth and margin assumptions.