Kubota Earnings: Expect Historic Revenue in 2025 With Secular Growth in Asia and North America

Wide-moat Kubota’s December-quarter revenue of JPY 738 billion was up 5.7% sequentially, showing a gradual recovery, in line with our expectations. While Europe continued to be a drag with a 22.3% year-on-year decline, worse than our expectation of a 20.0% decline, the shortfall was offset by a better-than-expected recovery in the domestic and North American markets. Based on the solid results, we maintain our 2025 revenue forecast of JPY 3.17 trillion, up 5% from the previous year, and our JPY 2,900 fair value estimate. We believe the shares are undervalued, reflecting concerns that Kubota may have already hit the revenue ceiling. However, Kubota’s share in construction equipment will continue to grow in key markets such as North America and Asia, with its leading position in subcategories such as compact track loaders and mini backhoes.