Wartsila Earnings: Sharp Uptick in Shipbuilding Activity Buoys Order Backlog to Record High

Investors welcomed wide-moat Wartsila’s stellar first-quarter results that featured a large uplift in order intake inspired by the significant uplift in global shipbuilding activity in early 2024. Wartsila shares are up 10% at the time of writing. Wartsila’s first-quarter order intake rose a substantive 17% organically—driving Wartsila’s order book to a record-high of EUR 7.3 billion—which should support elevated earnings growth in 2024 and 2025. With demand in 2024 for Wartsila’s suite of marine engines, systems, and equipment tracking significantly ahead of our prior forecast, we lift our fair value estimate by 18% to EUR 13. A swifter turnaround of Wartsila’s energy segment than we’d previously credited also contributes to our fair value estimate uplift, with the segment’s recovery in EBIT margin tracking ahead of our prior expectations. Wartsila shares screen expensively, trading at a 33% premium to our upwardly revised valuation.