HUSQ B: Execution And Cost Savings Will Drive Share Performance Through 2027

Key Takeaways

• Leadership in robotics and sustainable equipment, supported by innovation, is driving rapid market share gains and recurring revenue opportunities in both professional and consumer segments.
  
• Portfolio optimization and focus on high-growth, high-margin categories are improving capital efficiency and underpinning sustained earnings growth.
  
• Increased competition and weak market conditions are putting pressure on margins, sales growth, and profitability, especially in robotics and North American markets.

Catalysts

Produces and sells outdoor power products, watering products, and lawn care power equipment.

• The accelerating transition towards battery-powered, electric, and especially robotic outdoor equipment is expanding Husqvarna's addressable market and supporting double-digit sales growth in robotics and electrified categories, which is expected to drive above-average revenue growth and higher net margins as a greater share of sales comes from higher-ASP, lower-servicing products.
  
• Growing environmental consciousness and tightening emissions regulations are pushing professional and municipal customers to adopt sustainable solutions-an area where Husqvarna continues to lead through innovation, resulting in rapid market share gains in pro robotic mowers and watering products, likely translating into recurring revenue and improved earnings quality.
  
• Ongoing urban development and the increasing need for professional landscaping are broadening the commercial side of Husqvarna's business (proportion of professional revenue now at 35%), positioning the company to benefit from urban/municipality infrastructure investments and bolstering long-term revenue visibility.
  
• The company's emphasis on robotics and 'smart' connected solutions-including expansion into new use cases (e.g., golf, sports arenas, public spaces, and IoT watering systems)-supports new recurring after-sales income opportunities and fosters long-term customer loyalty, enhancing both revenue growth potential and net margins.
  
• Active portfolio optimization (focusing on higher-growth, margin-accretive categories and reducing inventory/net debt) is increasing capital efficiency and improving return on invested capital (ROIC), setting up Husqvarna for stronger long-term earnings growth.

Husqvarna Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Husqvarna's revenue will grow by 2.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.2% today to 5.6% in 3 years time.
• Analysts expect earnings to reach SEK 2.8 billion (and earnings per share of SEK 4.26) by about August 2029, up from SEK 1.4 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as SEK2.2 billion.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 11.3x on those 2029 earnings, down from 15.6x today. This future PE is lower than the current PE for the GB Machinery industry at 25.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.03%, as per the Simply Wall St company report.

Risks

• Intensifying competition from low-cost Asian manufacturers, especially in the entry and mid-range robotics segments, is contributing to aggressive price pressure, resulting in price reductions and negative price impacts (e.g., SEK 160 million negative in Q2 from robotics pricing), which can erode net margins and profitability over time.
  
• Persistent weak market conditions in North America across all divisions, driven by macroeconomic uncertainty and lower consumer demand, have led to declining sales in the region and heightened revenue volatility, particularly as North America remains a significant end market for Husqvarna.
  
• Increasing global tariffs and currency headwinds (SEK 225 million negative in the first half of 2025 from currency and tariffs combined) create ongoing upward cost pressure and could require further price hikes or margin sacrifices, impacting earnings and possibly constraining future growth investments.
  
• Growing market share of robotics products notwithstanding, Husqvarna's organic sales growth sometimes lags overall market growth in mid
• and entry-level robotic mower segments, possibly leading to gradual market share erosion and slower revenue momentum if not addressed.
  
• Sustained margin pressure in the entry-level segment due to low profitability and the need to maintain innovation investments to keep up with technological shifts (e.g., vision/LiDAR navigation) increases the risk of negative returns on R&D outlays in this segment, affecting long-term earnings quality.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of SEK43.0 for Husqvarna based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK57.0, and the most bearish reporting a price target of just SEK37.0.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be SEK49.0 billion, earnings will come to SEK2.8 billion, and it would be trading on a PE ratio of 11.3x, assuming you use a discount rate of 8.0%.
• Given the current share price of SEK38.9, the analyst price target of SEK43.0 is 9.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.