SGS Earnings: Strong Organic Growth Sends Shares Higher to Fairly Valued Territory

Wide-moat SGS reported strong 2024 earnings and positive momentum in the fourth quarter, sending shares up 7% in Feb. 11 trading. Organic revenue growth of 7.5% was driven by sustainability and digital but offset by currency effects of 5%. Adjusted operating margin improved by 60 basis points as new management rapidly executed its efficiency plans. Management expects 5%-7% organic sales growth and 1%-2% bolt-on contributions from acquisitions, both of which we anticipate it will meet. It also guided for at least 30 basis points in margin improvement but said that is a conservative estimate, given current macro and political instability. We reiterate our CHF 100 fair value estimate and think the stock is fairly valued following a 12% rise in the past week.