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Schneider Electric SE SU

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Morningstar’s Analysis

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1-Star Price

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5-Star Price

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Economic Moat

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Capital Allocation

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Supply Chain Shortages Weigh on Schneider Electric’s Third-Quarter Revenue but Growth Still Solid

Analyst Note

| Denise Molina, CFA |

Schneider Electric posted solid third-quarter organic growth with a mix of fundamental demand, price increases and possibly some redundancy in customer orders leading to 9% growth. Group revenue beat our forecast by around 3%; however, given the supply chain shortage challenges to delivering products, we do not plan to make material increases to our forecasts for the full year. Management estimated that without supply chain shortages revenue growth might have been 2% higher and expects shortages to continue into the next two to three quarters. We think widespread shortages may be causing a general feedback loop with customers looking to build in redundancy to secure supply for their production needs. To mitigate possible order cancellations, the company has started to put non-cancellation clauses into contracts. In the nine months of 2021, organic revenue growth exceeded 2019 levels by 7%. The company continues to put through price increases with a 2.3% average increase in the third quarter. We maintain our wide moat rating and fair value estimate.

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Company Profile

Business Description

France-based Schneider Electric is a leading global supplier to industrial, utility, data center, and energy customers. The company's products span from ground-level equipment to top-level analytics and execution software. Roughly 75% of its revenue comes from its low- and medium-voltage, while revenue from its automation division drives the remaining 25%. The company is the number-two and number-four supplier, respectively, in discrete (for example, manufacturing) and process (for example, fluid processing) automation. However, it holds the leading position in process safety systems.At the group level, software and services contribute about 10% of sales, integrated systems another 30%, and individual products (components and equipment) the final 60%.

Contact
35 rue Joseph Monier
Rueil Malmaison, 92500, France
T +33 141297000
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings
Fiscal Year End Dec 31, 2020
Stock Type
Employees 155,466