Schindler Stock Falls on Profit Plunge But the Elevator Maker May Soon Rise Again

Schindler Stock Falls on Profit Plunge But the Elevator Maker May Soon Rise Again

By Callum KeownAug. 14, 2019 7:09 am ET

Schindler elevators at Macquarie Bank’s building in Sydney Schindler press picture

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Schindler’s stock has fallen after its net profit dived but the Swiss elevator maker’s shares could come straight back up as its future investments take hold.

The back story. The major players in the global elevator market, includingSchindler , Otis of the US, and Finland’s Kone , are all in the process of modernizing.

Industry leader Kone has partnered with IBM to use its innovative technologies in its elevators.

Schindler has invested significantly into preparing for the future, developing products such as Smart Mirror, an intelligent elevator that provides users with information ranging from the weather and transport updates to food menus, and AdScreen which displays adverts inside the elevator.

The Zurich-listed company is confident its strategic projects will allow it to capitalize on the expected growth in the construction and infrastructure sectors.

Schindler has also made inroads into the public transport space in China and the U.S.

What’s new. The company’s net profit fell 22% to CHF 239 million in the second quarter – excluding a one-time tax refund the company’s net profit slipped 5.5%.

Over the first half of the year net profit dropped 15.5% to CHF 436 million.

Schindler blamed wage inflation, higher material costs and a spending increase on strategic projects, including the digitization of the business.

Sales in the three months to the end of June rose 2.4% on the previous year to CHF 2.85 billion.

The company warned markets may “weaken slightly” over the rest of the year but expected revenue growth of between 4% and 6% for the full year and net profit of CHF 900-940 million.

Shares in the firm dropped 3.4% in early trading on Wednesday.

Moving forward. Schindler’s full-year targets may seem ambitious given the company would need to more than double its half-year net profit.

The challenge will be made greater by the weakening market it warned on over the remainder of the year.

However, ODDO BHF analyst Delphine Brault said 2019 was a transition year and the positive effects of Schindler’s investments should take over going forward.

With sales and order intake continuing to increase, and the company set to reap the rewards of its investment, its stock will rise again.

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