Sandvik Earnings: Largest Quarterly Order Decline Since 2020; Maintain Our Fair Value Estimate

Narrow-moat Sandvik reported a 7% decline in organic order intake during the third quarter, its largest decline since fourth-quarter 2020, explained by the short-cycle nature of demand for its products and services, which are exposed to cyclical swings in the economy. Organic revenue grew 1% year over year, supported by the execution of its healthy order backlog for mining equipment and aftermarket services, which was largely offset by its short-cycle machining segment. The daily order intake in the machining segment during the first two weeks of the fourth quarter remained consistent with the third quarter, and thus there appears to be no sign of a significant deterioration in the macroeconomic environment. Shares are currently trading at a slight discount to our SEK 200, which we maintain.