Schindler Earnings: Order Intake Shows Strength Against a Challenging Market Context

Wide-moat Schindler SCHN achieved strong constant-currency sales growth of 15% in the second quarter, with a robust order book supporting new equipment and modernisation revenue. Schindler’s service business also grew strongly across all geographies, bolstering second-quarter top-line growth. Our expectations for Schindler remain largely unchanged, forecasting full-year net profit of CHF 899 million, at the top end of Schindler’s CHF 860 million-CHF 900 million guided range. Investors welcomed the result with Schindler shares up 5% at the time of writing, having likely warmed to the strength of Schindler’s second-quarter new order intake—relative to peers and against a difficult market environment for new equipment. Schindler shares screen as approximately fairly valued, trading at a 2% discount to our unchanged CHF 210 fair value estimate.

New orders rebounded solidly in the second quarter, rising about 7% from a year earlier. Consequently, year-to-date organic order intake is roughly flat year on year, and contrasts with the new order performance of peer wide-moat Kone, which recently reported further order intake declines during its second quarter of 2023. Underweight exposure to China explains most of the relative outperformance of Schindler’s order book in 2023 year to date. Furthermore, pleasing new order performance in Europe, Middle East, and Africa—Schindler’s most important geography, accounting for about 43% of group sales in 2022—also contributed, rising by midsingle digits against a weakening broader market context. Year to date, new orders are largely tracking our full-year 2023 expectations for an approximate 3% decline, with further market weakness anticipated in EMEA and North America throughout the remainder of 2023.

While the near-term macroeconomic environment remains unconducive for the new equipment business, profit margins are improving in 2023. Schindler’s second-quarter EBIT margin rose to about 11%, up a meaningful 2.9% from a year ago.