Investing.com -- Bechtle’s (ETR:BC8G) stock showed signs of recovery in intraday trading on Friday after its preliminary first-quarter results came in significantly below market expectations.
Analysts pointed to the company’s challenges in navigating tough economic conditions, particularly a current budget freeze among German public clients, which has put a damper on performance until a new government is formed.
These delays, coupled with other financial pressures, contributed to a dip in business volume and a decline in revenue.
In its preliminary earnings report, Bechtle revealed a 3% year-on-year drop in revenue, which totaled €1.46 billion for Q1, reflecting a slowdown in business activity.
While the business volume remained relatively stable on a year-over-year basis at €1.96 billion, it fell 14% compared to the previous quarter.
The company’s earnings before taxes (EBT) also showed a significant downturn, reaching just €55 million, down 33% from the same period last year and a sharp 45% lower than the previous quarter.
The EBT margin fell to 3.8%, a decrease of 168 basis points compared to the first quarter of 2024.
The decline in profitability was largely attributed to higher personnel costs, which were driven partly by acquisitions made in 2024 and an increase in non-wage labor costs.
Further pressure on earnings came from lower bonus payments from manufacturing partners and a reduction in marketing allowances, which fell by €5 million.
However, analysts noted that compared to the final quarter of 2024, cost increases have begun to slow, providing some relief for the company.
Despite these setbacks, Bechtle’s management maintained its guidance for 2025, citing early signs of recovery, particularly in April, driven by improved conditions among German public clients.
The company forecast business volume growth between 0% and 5%, with revenue growth ranging from a 3% decline to a 3% increase. EBT is expected to grow within a 5% range, either up or down, for the full year.
Analysts at Jefferies pointed out that while the first-quarter results were disappointing, the intraday stock recovery indicated some optimism in the market, fueled by the company’s reaffirmed outlook for the year.