Investing.com -- Citi lifted its rating on Schneider Electric (EPA:SCHN) to Buy from Neutral following a recent stock price de-rating, which brought the valuation in line with competitors Legrand (EPA:LEGD) and ABB (ST:ABB).
“We see the valuation attractive in a sector context for the first time in close to three years,” Citi analysts led by Martin Wilkie said in a note.
They believe the market has already priced in mid-term growth below the company’s targets, but they maintain a “structurally attractive” view of Schneider’s long-term outlook.
Despite a potential mild recession scenario, Citi expects Schneider Electric to achieve positive organic sales growth in 2025 and 2026.
This projection is supported by the company’s updated data center outlook, which sees capital expenditure (capex) by hyperscalers growing by 35% and 15% in 2026. “While slower than before, we think this outcome would be much better than feared by investors,” analysts said.
With respect to Schneider’s end market, the analysts point out that the company’s data center backlog should sustain growth into 2025.
Although some cyclical markets like industrial automation may experience modest declines in the second half of 2025, the company’s energy management sector is likely to remain robust due to a record backlog in data center and infrastructure projects.
Citi expects Schneider’s margins to remain stable or improve into 2026. The Wall Street firm also considers the company’s tariff risk to be lower than the sector average, as 90% of its sourcing and manufacturing is strategically located within regional hubs, mitigating the impact of potential higher U.S. tariffs.
Alongside the upgrade, Citi analysts trimmed their price target on Schneider Electric shares to €245 from €250 and revised the EBITA forecasts downward by approximately 7% for 2025 and 11% for 2026.
The analysts expect Schneider Electric to guide towards the lower end of its 7-10% organic growth target and forecast a margin of around 19% in 2025.