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UBS raises Volvo outlook


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Dagens Industri/Bloomberg  /  March 13, 2017

UBS has raised its recommendation for Volvo from neutral to buy. The price target is raised to SEK 140 from SEK 91.

Volvo closed at 122.90 kronor on Friday.

UBS believes that Volvo Group's margins structural transformation with a strong cyclical trend in the truck markets in North America and Europe underestimated the stock market.

"We believe that Volvo will be revalued and break out of its trading range at 80-120 crowns," writes UBS in an analysis dated Monday.

The upgrade noted that the profitability of Volvo Trucks unit has moved to sustained higher levels rather than become the lifting of a cyclical peak.

"We expect to see heavy truck margins rise to 9.5 percent in 2018 and remain at this level," writes UBS in the analysis.

UBS also has a brighter view of the market cycle and is 3-5 percent higher than the consensus estimate of their truck volumes in markets in Europe and North America.

Furthermore, UBS believes that infrastructure investments in China, a recovery in the construction market in Europe and a strong construction and infrastructure market in the US will lift construction equipment market to a greater extent than the consensus expects.

Volvo shares rose 1.7 percent to 125 kronor in Monday's opening trading on the Stockholm Stock Exchange.


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