On Tuesday, Citi updated its financial outlook on Wartsila Oyj Abp (WRT1V:FH) (OTC: WRTBY) shares, raising the price target to EUR20.50 from the previous EUR17.50. The firm maintained a Neutral rating on the stock. The adjustment comes ahead of the company’s third-quarter earnings report, which is scheduled for release on October 29, 2024.
The analyst at Citi indicated that the consensus for Wartsila’s third-quarter group orders appears satisfactory, but there are concerns that revenue expectations might be slightly overestimated.
The firm highlighted ongoing challenges in the Energy sector, including price deflation and increased competition in the Storage market, as well as a lack of significant change in thermal orders.
Concerns were also raised regarding the potential impact of product mix on margins for the second half of the year. The analyst suggested that this could continue to be a hindrance to margin expansion in the years 2025-2026.
Despite these challenges, the analyst noted that Wartsila’s stock has experienced a re-rating, now trading at a premium of approximately 25% over the sector average, which is higher than historical norms. The firm stated that while it’s premature to adopt a negative stance on Wartsila’s shares, caution is warranted.
The report concluded with an optimistic note on the Marine sector, particularly the cruise industry, which could lead to strong order potential in the upcoming quarters. This factor is expected to provide support for Wartsila’s shares in the market.
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