Schneider Electric's Demand Solid Overall, but European Consumer-Oriented Product Demand Slowing

Schneider Electric reported solid third-quarter revenue growth of 12% across energy management and automation products, and maintained guidance for the year. We maintain our wide moat rating and EUR 150 fair value estimate. Based on comments we have heard so far this earnings season from European Capital Goods' management, we expect Schneider Electric and other companies exposed to the European residential buildings market to see slower growth in 2023. That weakness is not a surprise and has been in our forecast—we have just 2% growth baked into our 2023 revenue forecast for Schneider. European consumers are losing steam in spending power in the face of extraordinary inflation, particularly on energy prices and therefore a near-term spending slowdown across most product categories is looking more likely. Roughly 15%-20% of Schneider Electric's revenue comes from more cyclical-driven revenue, related to data center capital expenditure and the residential electrical component market globally.