Global Trade Uncertainty Will Hinder Progress But Offer Value

Key Takeaways

• Persistent trade uncertainties and slow client decisions hamper new projects, causing weak revenue growth despite globalization and digital transformation efforts.
  
• Heavy dependence on volatile sectors and sluggish market conditions undermine steady margin gains and make sustained revenue recovery uncertain.
  
• Broad-based declines in key segments, regional demand weaknesses, and industry shifts threaten Elanders' revenue stability and pose long-term risks to sustained margin growth.

Catalysts

A logistics company, provides supply chain, and print and packaging solutions in Sweden, Germany, the United States, Singapore, the United Kingdom, the Netherlands, India, China, Switzerland, Poland, Hungary, and internationally.

• While Elanders stands to benefit from the ongoing globalization of supply chains and the resulting complexity in logistics, persistent trade uncertainties and slow decision-making among its major customers are leading to delayed new project implementations and muted revenue growth in the near term.
  
• Although accelerated digital transformation and internal investments in AI-driven warehouse management systems, such as CloudX, are poised to support margins and operational efficiency, execution risk around group-wide rollouts and possible underutilization could limit margin improvements if adoption by clients remains slow.
  
• Despite Elanders' strategic move towards increasing its share of value-added supply chain services and consolidation in print through market exits by competitors, overarching negative organic growth continues across most segments, with only electronics showing resilience, making near-term revenue stabilization doubtful.
  
• Even as the company steps up cost-saving measures and maintains strong cash conversion, overreliance on cyclical sectors like automotive and fashion-which are facing acute volume declines-introduces substantial earnings volatility, challenging the goal of steady margin expansion.
  
• While long-term industry shifts such as the rise of omni-channel retail theoretically boost demand for integrated logistics players, ongoing sluggishness in key European and North American markets, compounded by regulatory and geopolitical trade headwinds, means sustainable top-line growth and margin recovery may remain elusive for several quarters.

Elanders Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Elanders compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Elanders's revenue will decrease by 0.1% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 0.6% today to 3.4% in 3 years time.
• The bearish analysts expect earnings to reach SEK 459.1 million (and earnings per share of SEK 13.01) by about July 2028, up from SEK 83.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 7.6x on those 2028 earnings, down from 23.6x today. This future PE is lower than the current PE for the GB Logistics industry at 23.5x.
• 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 10.11%, as per the Simply Wall St company report.

Elanders Future Earnings Per Share Growth

Risks

• Persistent negative organic growth across most customer segments, including significant declines in automotive, industrial, fashion, food and beverage, and online print, poses a serious risk to future revenue growth and could undermine long-term earnings stability.
  
• Uncertainty created by ongoing global trade negotiations and shifting trade barriers continues to slow customer decision-making and project implementation, which threatens Elanders' pipeline conversion and could result in unpredictable or delayed revenue recognition.
  
• The continued decline in demand in key markets such as North America and the UK-despite some recent wins and a growing project pipeline-suggests regional weaknesses that could lead to further margin compression or revenue contraction if these trends persist.
  
• The company's ongoing exposure to cyclical sectors like automotive and industrials, which suffered sharp and unexpected downturns in the reported quarter, could result in amplified earnings and cash flow volatility during periods of macroeconomic stress or sector-specific weakness.
  
• While cost savings and internal efficiency measures have protected margins short term, the need for continued structural actions and the challenges of pivoting segments such as Print & Packaging amid industry digitization raise questions about the long-term sustainability of Elanders' margin improvements and bottom-line growth.

Valuation

• The assumed bearish price target for Elanders is SEK75.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Elanders's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK110.0, and the most bearish reporting a price target of just SEK75.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be SEK13.7 billion, earnings will come to SEK459.1 million, and it would be trading on a PE ratio of 7.6x, assuming you use a discount rate of 10.1%.
  
• Given the current share price of SEK55.4, the bearish analyst price target of SEK75.0 is 26.1% higher.
  
• 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.