Carl Zeiss Posts Durable Growth Against Temporary Margin Contraction; Expecting to Raise FVE

Narrow-moat Carl Zeiss posted mixed fiscal first-quarter results with strong sales but weak margins. Adjusted revenue grew by 12% year over year, but operating margins fell substantially. Nonetheless, we think the overall picture looks positive for the firm. Currency-adjusted sales growth was better than anticipated and looks to be on track to rebound more closely with the firm's peers. Meanwhile, operating margins appear uncharacteristically low in part from temporary headwinds. Considering sturdy top-line gains against brief margin headwinds, we expect to raise our fair value estimate.