Kongsberg shares fall in Oslo, hit by a disappointing second quarter and Morgan Stanley’s ratings
Analysts highlight the lack of positive surprises and note that this poses a challenge to the share’s current valuation
(Il Sole 24 Ore Radiocor) - Kongsberg has come under heavy selling pressure on the Oslo Stock Exchange, due to a second quarter that fell slightly short of expectations and comments from Morgan Stanley analysts. The Norwegian defence and aerospace group’s share price thus continues its downward trend of recent days. Over five trading sessions, the price has fallen by 17 per cent and its year-to-date gain has shrunk to around 6 per cent.
In the second quarter, Kongsberg’s EBITDA stood at 2.05 billion Norwegian kroner (up from 1.12 billion), slightly below the consensus estimate; turnover rose by 31 per cent to 10.4 billion, whilst orders received increased to 17.07 billion (from 11.2 billion), bringing the order book to 157.5 billion. Kongsberg notes that the majority of orders for the quarter relate to the Joint Strike Missile (JSM), with three contracts signed during the quarter. “Strong demand for Kongsberg’s technology and solutions, together with good progress on key projects, contributed to a robust second quarter,” said Eirik Lie, the Norwegian group’s chairman and CEO, noting that the quarter saw the award of several significant contracts, as well as an increase in sales to the United States and Germany, whilst Canada became the sixth country to choose the JSF missile. Canada has also announced its decision to enter into negotiations with Norway and Germany regarding the acquisition of 212CD submarines, in which Kongsberg is regarded as “a key partner”.
Despite the company’s guidance, analysts at Morgan Stanley described the report as disappointing, highlighting the lack of positive surprises and noting that this poses a challenge to the share’s current valuation. Morgan Stanley points out that the business mix is less favourable, sales are in line with forecasts and the EBITDA result is weak. Experts at the US bank also stress that converting projects in the development phase into firm orders will be crucial to bolstering confidence in the growth targets presented during Investor Day. Morgan Stanley maintains its ‘underweight’ rating on the share.
