Company Reports

SKF reported second-quarter adjusted operating margin of 13.9%, with specialized industrial solutions expanding by 490 basis points year over year to 15.2%, driven by aftermarket growth, segment mix, and an improvement in lubrication.

SKF is a global leader in industrial bearings and rotating equipment solutions, operating in segments where reliability, efficiency, and engineering know-how matter most. The company is reshaping itself into two focused businesses, industrial and automotive, to sharpen strategic execution and unlock value. We believe the separation will improve focus and resource allocation as the two segments serve different customers, operate on different sales cycles, and face distinct competitive dynamics. We do, however, expect some near-term separation pains, as the process will be costly and operationally disruptive before the benefits materialize.

SKF reported a flat adjusted operating margin of 13.5% year on year in first-quarter 2026, despite a 9.9% currency headwind. Operating cash flow turned negative, reflecting SEK 700 million of separation-related payments and a working capital buildup.

SKF had a messy close to 2025, marked by currency headwinds, restructuring charges, and a delay in the automotive separation. Despite this, the group expanded its adjusted operating margin to 11.8%, demonstrating disciplined pricing and cost control in a soft demand environment.

SKF is a global leader in industrial bearings and rotating equipment solutions, operating in segments where reliability, efficiency, and engineering know-how matter most. The company is reshaping itself into two focused businesses, industrial and automotive, to sharpen strategic execution and unlock value. We believe the separation will improve focus and resource allocation as the two segments serve different customers, operate on different sales cycles, and face distinct competitive dynamics. We do, however, expect some near-term separation pains, as the process will be costly and operationally disruptive before the benefits materialize.

We take a fresh look at SKF as we transfer coverage. SKF is the global leader in industrial bearings and rotating equipment solutions, serving mission-critical applications where reliability, efficiency, and engineering know-how drive customer decision-making.

SKF delivered another resilient performance in third-quarter 2025, with organic growth of 2% and adjusted operating margin of 12.3%, up 40 basis points year over year. Meanwhile, reported sales fell 5% and EBIT slipped 2% due to significant currency headwinds.

SKF is the largest bearings manufacturer globally, with about 20% share of the global bearings market—roughly double its nearest rival. In perpetuating its industry-leading position, SKF leverages its expertise and reputation for bringing innovative, energy-efficient, and durable industrial and automotive bearings to market. SKF aims to work in partnership with its original equipment manufacturer, or OEM, customers—which include a highly diverse set of market industrial sectors and market verticals—during their product design process, offering its extensive engineering know-how in friction minimization. Specification of the correct and optimally customized bearing offers SKF’s customers greater energy efficiency and can also help to minimize machine downtime, which are both attractive attributes to users of industrial equipment. In this way, the relationship adds value for SKF’s OEM customers—which account for about 65% of group sales—while also creating demand for its bearings in the third-party distribution channel, where sales result from the need to replace existing SKF bearings and other products that have come to the end of their useful life.

SKF reported second-quarter revenue of SEK 25.6 billion, down 9.6% year over year. Despite a 0.2% decline in organic growth, disciplined pricing and cost controls supported the group’s adjusted operating margin, which improved to 13.3% from 13% last year. Cash flow recovered to SEK 2.8 billion.

SKF is the largest bearings manufacturer globally, with about 20% share of the global bearings market—about twice as much as its nearest rival. In perpetuating its industry-leading position, SKF leverages its expertise and reputation for bringing innovative, energy-efficient, and durable industrial and automotive bearings to market. SKF aims to work in partnership with its original equipment manufacturer, or OEM, customers—which include a highly diverse set of market industrial sectors and market verticals—during their product design process, offering its extensive engineering know-how in friction minimization. Specification of the correct and optimally customized bearing offers SKF’s customers greater energy efficiency and can also help to minimize machine downtime, which are both attractive attributes to users of industrial equipment. In this way, the relationship adds value for SKF’s OEM customers—which account for about 65% of group sales—while also creating demand for its bearings in the third-party distribution channel, where sales result from the need to replace existing SKF bearings and other products that have come to the end of their useful life.

SKF’s first-quarter revenue declined 3% year over year, but disciplined pricing and mix kept adjusted operating margin at 13.5%, despite the seventh consecutive quarter of negative organic growth. Cash flow fell 45% to SEK 977 million, reflecting higher working capital.

Narrow-moat SKF reported mixed fourth-quarter results. Group organic growth declined by 3.1%, which was better than feared and group net sales were ahead of our expectations, driven mainly by a positive currency effect. Management declined to provide 2025 full-year guidance, but indicated they expect organic sales to weaken somewhat year on year in the first quarter. We plan to incorporate this into our forecasts, but expect to make no material change to our SEK 240 fair value estimate.

SKF is the largest bearings manufacturer globally, with about 20% share of the global bearings market—about twice as much as its nearest rival. In perpetuating its industry-leading position, SKF leverages its expertise and reputation for bringing innovative, energy-efficient, and durable industrial and automotive bearings to market. SKF aims to work in partnership with its original equipment manufacturer, or OEM, customers—which include a highly diverse set of market industrial sectors and market verticals—during their product design process, offering its extensive engineering know-how in friction minimization. Specification of the correct and optimally customized bearing offers SKF’s customers greater energy efficiency and can also help to minimize machine downtime, which are both attractive attributes to users of industrial equipment. In this way, the relationship adds value for SKF’s OEM customers—which account for about 65% of group sales—while also creating demand for its bearings in the third-party distribution channel, where sales result from the need to replace existing SKF bearings and other products that have come to the end of their useful life.

We’ve raised our fair value estimate for narrow-moat SKF by 9% to SEK 240 to account for the secular tailwind, which the trend toward greater energy efficiency in motorized equipment and systems is likely to represent for SKF’s industrial bearings segment. We think the industrial sector will invest significantly in energy-efficient capital equipment, systems, and interventions in the coming decade as it seeks out its lowest cost route to eventual decarbonization. Energy-efficiency interventions are a sweet spot for the industrial sector, offering low carbon abatement cost options, which are often value-accretive capital expenditures that provide a positive net present value. The greater incorporation of advanced bearings in motorized industrial equipment represents one such energy-efficiency opportunity, with the rising use of advanced bearings likely to drive an expansion in the global addressable market for industrial bearings. SKF—as the industry leader in the global bearings market—is well positioned to benefit.

Despite modest sequential improvement, market conditions remained soft in narrow-moat SKF’s industrial and automotive end markets in late 2024, with group organic sales contracting 4.4% organically in the third quarter. Weakness was broad-based, with top-line organic growth for the industrial and automotive segments easing 4.6% and 4.0% year on year, respectively. Notwithstanding, SKF delivered a pleasing 40-basis-point widening of its EBIT margin year on year, owing to strong price realization and positive mix shift within the industrial segment, which more than offset the operating deleveraging impact of falling sales volumes during the period. We think SKF’s profit margin progression in late 2024 speaks to the secular growth opportunity that exists for SKF’s higher-priced, advanced industrial bearings ranges as the industrial sector seeks to improve its energy efficiency credentials over the coming decade.

Weak demand conditions have persisted in 2024 year to date for narrow-moat SKF, with organic sales growth contracting 6.6% in the second quarter. Weakness in organic sales was relatively broad-based in the second quarter, proving pervasive across geographies and customer industries. Still, SKF delivered a resilient second-quarter EBIT margin of 13.0%, down just 30 basis points year on year as active management of the bearings portfolio and pricing initiatives helped to partially offset the negative impact posed to profit margins from the appreciable decline in sales volumes.

SKF is the largest bearings manufacturer globally, with about 20% share of the global bearings market—about twice as much as its nearest rival. In perpetuating its industry-leading position, SKF leverages its expertise and reputation for bringing innovative, energy-efficient, and durable industrial and automotive bearings to market. SKF aims to work in partnership with its original equipment manufacturer, or OEM, customers—which include a highly diverse set of market industrial sectors and market verticals—during their product design process, offering its extensive engineering know-how in friction minimization. Specification of the correct and optimally customized bearing offers SKF’s customers greater energy efficiency and can also help to minimize machine downtime, which are both attractive attributes to users of industrial equipment. In this way, the relationship adds value for SKF’s OEM customers—which account for about 65% of group sales—while also creating demand for its bearings in the third-party distribution channel, where sales result from the need to replace existing SKF bearings and other products that have come to the end of their useful life.

We make no change to our SEK 220 fair value estimate for narrow-moat SKF following delivery of first-quarter 2024 results, which tracked broadly in line with our full-year forecasts and company guidance. Organic sales declined by 7%, reflecting a broad-based weakening of demand for SKF’s industrial and automotive bearings amid challenging market conditions. Still, SKF delivered a pleasing 30 basis points of EBIT margin progression to 13.4% despite the easing of the top line in the first quarter. Lower raw material costs and easing labor cost inflation for the automotive segment largely accounted for the improvement in EBIT margin performance in early 2024.

Investors welcomed narrow-moat SKF’s fourth-quarter 2023 result, with SKF shares trading some 5% higher at the time of writing, ostensibly warming to strong operating margin progression for the industrial bearings segment, which edged out our and the market’s expectations. As we’d anticipated fourth-quarter sales weakened in industrial bearings—SKF’s largest segment, accounting for about 85% of group earnings—as slowing economic growth resulted in lower customer demand in all regions. Still, SKF’s efforts to focus on higher-profit margin bearings categories—and to exit more commoditized, lower-profit margin segments of the industrial bearings market—bore fruit, with the industrial segment EBIT margin rising to 15.4% in 2023, up 210 basis points year on year. Consequently, SKF delivered group full-year 2023 EBIT of about SEK 13.0 billion, beating consensus and our forecast by 2% and 3%, respectively.

SKF is the largest bearings manufacturer globally, with about 20% share of the global bearings market—about twice as much as its nearest rival. In perpetuating its industry-leading position, SKF leverages its expertise and reputation for bringing innovative, energy-efficient, and durable industrial and automotive bearings to market. SKF aims to work in partnership with its original equipment manufacturer, or OEM, customers—which include a highly diverse set of market industrial sectors and market verticals—during their product design process, offering its extensive engineering know-how in friction minimization. Specification of the correct and optimally customized bearing offers SKF’s customers greater energy efficiency and can also help to minimize machine downtime, which are both attractive attributes to users of industrial equipment. In this way, the relationship adds value for SKF’s OEM customers—which account for about 65% of group sales—while also creating demand for its bearings in the third-party distribution channel, where sales result from the need to replace existing SKF bearings and other products that have come to the end of their useful life.