Konecranes (HLSE:KCR) Net Profit Margin Rises, Undervalued Status Challenges Market Growth Concerns

Konecranes (HLSE:KCR) posted net profit margins of 8.9%, up from 7.9% a year ago, as earnings are forecast to grow by 9.1% annually with revenue expected to rise at 3.1% per year. Despite these improvements, both earnings and revenue growth trail the Finnish market's averages of 16.2% and 4% respectively, and recent earnings growth of 17.8% lags behind the company’s five-year compound annual earnings growth of 30.1%. Investors are eyeing the balance of sustained profitability and a price-to-earnings ratio of 16.9x, which is more attractive than both the industry and peer group averages, while also noting that the share price at €81.85 remains below estimated fair value, but has experienced volatility in recent months.

See our full analysis for Konecranes.

Let’s see how these results stack up against the dominant narratives. Sometimes the numbers confirm what everyone expects, while at other times, the story takes a turn.

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Premium Margins Meet Slower Growth Pace

• Net profit margins are now 8.9%, reflecting a robust profitability level. However, this is paired with forecast revenue growth of just 3.1% per year, underperforming the Finnish market's 4% average.
• Analysts' consensus view highlights that although Konecranes delivers solid margins and steady growth, the company’s progress is underpinned by leadership in automation and sustainability. These factors are expected to continue supporting premium pricing and recurring revenue.
  • Ongoing expansion into high-margin service contracts and advanced industrial solutions is expected to lessen the impact of slow top-line growth.
  • However, heavy reliance on cyclical end-markets and evolving demand in services could still introduce volatility in revenue and earnings despite these strengths.
• Consensus narrative notes that the company’s recent 17.8% earnings growth rate sits below the impressive 30.1% compound annual rate over the previous five years, signaling a marked deceleration that analysts are keeping a close eye on.
  • Shareholder focus is likely to center on whether innovative service agreements and automation leadership can offset ongoing market softness and margin compression risks.
  • Despite industry-average-topping margins, recurring revenue is a crucial buffer as service growth outlooks cool in some regions, especially the Americas and EMEA.
  See the full consensus perspective and what industry experts expect next in the full breakdown. 📊 Read the full Konecranes Consensus Narrative.

Service Contracts Drive Margin Resilience

• The company’s strategy to expand agreement-based service contracts is boosting the share of high-margin, recurring revenues within the business mix. These contracts are highlighted as a bulwark against volatility.
• Analysts' consensus view underscores that this growing base of recurring service revenues reduces earnings volatility and supports a more stable margin structure.
  • This is particularly important given Konecranes’ exposure to cyclical industrial and port end-markets, which can otherwise swing order cycles and short-term earnings.
  • Risks remain as recent order intake data show softness in Industrial Service and spare parts across key geographies, posing a challenge to long-term stability unless counterbalanced by continued contract expansion.

Attractive Valuation Against Fair Value Benchmark

• Konecranes trades at a price-to-earnings ratio of 16.9x, undercutting both industry (19.7x) and peer group (21.8x) averages. Its €81.85 share price sits at a steep 31% discount to the DCF fair value estimate of €118.83.
• Analysts' consensus view points out this valuation discount offers a margin of safety. Analysts see the stock as undervalued if margin expansion and recurring revenue strategies succeed.
  • The key watchpoint is that analyst price targets cluster near €81.5, closely matching the current share price, reflecting some caution around forecasting further re-rating in the near term.
  • While the company appears favorably priced given its fundamentals, recent share price volatility may give some investors pause as they weigh stable margins against ongoing growth challenges.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Konecranes on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Konecranes research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

Konecranes’ slower projected revenue and earnings growth, along with recent volatility, raises concerns about its ability to consistently outperform the market in the future.

If you want to focus on stocks showing reliable revenue and earnings progress, check out our stable growth stocks screener (2089 results) to see which companies deliver steadier results across the cycle.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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