Legrand Earnings: Sales Decline Bigger Than Expected, but Full-Year Guidance Unchanged

Narrow-moat Legrand reported a 5% decline in organic sales during the first quarter, a bigger drop than the 3% decline expected by company-compiled consensus, which sent shares 4% lower intraday. A weak building sector, which accounts for 80% of its revenue, was the primary reason for the decline and its underperformance against electrical peers, while sales to data center customers have not grown at the same pace as some of its peers. Full-year 2024 guidance of low-single-digit revenue growth, including acquisitions, and an adjusted operating margin of between 20% and 20.8% was kept unchanged. We believe its capital goods peers ABB, Schneider Electric, and Siemens offer investors a better growth outlook. We reiterate our EUR 87 fair value estimate and view shares as fairly valued.