Elekta’s Q1 beats estimates, shares jump

Investing.com — Shares of Elekta (ST:) jumped on Wednesday, following its first quarter results. 

At 5:30 am (0930 GMT), Elekta was trading 5.7% higher at SEK 72.95.

The company’s quarterly results exceeded expectations in terms of both sales and profitability, providing a much-needed boost to its stock, which had experienced significant declines in recent months.

Elekta’s First quarter results were marked by a 10% increase in order intake at constant currency (CER), well above the consensus expectation of no growth. This order growth was largely driven by a significant $38 million contract in Mexico. 

The company’s sales for the quarter totaled SEK 3,825 million, surpassing the consensus estimate of SEK 3,689 million by 4%. Organic sales growth (OSG) reached 0.8%, exceeding the anticipated decline of 2.9%.

The company’s adjusted gross margin (GM) was recorded at 37.8%, ahead of the consensus estimate of 36.8%. 

Adjusted EBIT amounted to SEK 283 million, representing a 23% beat over the consensus estimate of SEK 230 million, resulting in an adjusted EBIT margin of 7.4%, compared to the expected 6.2%. Adjusted diluted earnings per share (EPS) came in at SEK 0.41, beating the consensus of SEK 0.32 by 27%.

The Americas saw a 16% increase in orders, while EMEA faced a 12% decline, driven by tough comparisons from large installations in Spain and Italy. 

The APAC region posted a 3% growth, bolstered by strong performance in India and Korea, although China continued to face challenges due to the ongoing anti-corruption campaign.

Elekta’s sales mix shifted towards Services, which grew by 5%, while Solutions saw  a 3% decline. The company faced margin pressure, with the gross margin declining 380 basis points year-over-year due to inflationary pressures and reduced inventory revaluation impacts. 

However, the company has implemented measures to improve profitability, including price hikes and cost-saving initiatives, which led to a sequential improvement in gross margin.

Elekta reaffirmed its FY24/25 guidance, expecting mid-single-digit (MSD) revenue growth, compared to the consensus forecast of 3.5%, and EBIT margin expansion. 

The company anticipates a weaker H1, with a rebound in sales and profitability expected in H2, driven by new product launches and productivity improvements. For the longer term, Elekta aims to achieve an EBIT margin of 14% or higher by FY27/28, supported by strong customer interest and growing demand for its cancer care solutions.

“Capturing the beat to adj EBIT implies c. 2% upgrades to consensus adj EBIT for the full-year,” said analysts at J.P. Morgan. 

Despite the positive results, the brokerage  flagged ongoing risks, such as visibility issues, slower installations, exposure to China, and supply chain disruptions. 

Jefferies analysts echoed the sentiment, emphasizing that Elekta’s Q1 results exceeded expectations and should help the company’s shares recover some of the losses experienced over the past three months. 

With shares down over 21% in the past three months and 16% year-to-date, the stronger-than-anticipated start to the year is seen as a significant boost. 

The analysts anticipate that the recovery in Elekta’s stock will likely continue as the company navigates its fiscal year with improved performance.