Assa Abloy Earnings: Operating Leverage Strong in Late 2024; Recovery in 2025 Still in Sight

Fourth-quarter organic sales growth remained flat for wide-moat Assa Abloy, according with our expectations and subdued by still soft construction activity in late 2024. Consequently, full-year top-line growth of 7% also matched our estimates, with all top-line growth in 2024 being delivered by acquisitions, including the first full-year sales contribution from the HHI acquisition, which was completed in mid-2023. Notwithstanding, full-year EBIT came in approximately 2% ahead of our expectations with fourth-quarter margin progression eclipsing our expectations. Indeed, the strong fourth-quarter EBIT margin of 16.5%—up 100 basis points year on year—was the result of strong price versus cost tailwinds and good operational execution, which outstripped the otherwise dilutive impact of acquisitions on the group EBIT margin. We expect to nudge our operating margin and earnings estimates upward for 2025 given the strong fourth-quarter margin performance. Still, we don’t expect this to have a material impact on our SEK 320 fair value estimate.