Atlas Copco - 3Q24 Key Takeaways

Stock update - 3Q24 Results

Atlas Copco reported a weaker 3Q24 result with orders down 1%, revenue down 3% to SEK43b and adjusted operating profits down 7% to SEK9.4b. As seen in the graph above, Atlas Copco continues to experience modest order growth following a significant ramp in 2021 driven by share gains, pricing and robust end market growth.

The business is high-quality, but remains cyclical and exposed to capital budgets. End-markets such as electric vehicles and the general processing industry have begun to slow purchasing due to geopolitical tensions and the US election. With Atlas Copco largely up to date in its order backlog, the near-term revenue outlook is expected to remain weaker. Management notes that “customer activity will weaken somewhat”, which indicates that the next year could likely be another transition year.

Given its decentralised operations, Atlas Copco has moved quickly to rightsize its cost base within certain sectors including Vacuum and Industrial Technique. This should help protect margins against lower volumes, a higher contribution from dilutive M&A and currency effects. The margin pressures were discussed broadly in our July investment write-up here, and is now largely reflected in consensus numbers.

While Atlas Copco innovates and remains well positioned for long-term growth, the company faces multiple near-term headwinds. And with the business trading on a forward P/E of 28x, with 7% organic earnings growth, there are better opportunities elsewhere.