Schneider Electric: Double-Digit Organic Sales Growth Tops Consensus Estimates; Shares Undervalued

Wide-moat Schneider Electric reported 11.5% organic revenue growth during its third quarter, marginally exceeding company-compiled consensus of 10.9%. Schneider is well positioned for secular growth themes, such as the energy transition and digitalization, which formed the foundation of its 23% organic revenue growth in systems and backlog growth, most notably from data center and electric utility end markets. Full-year guidance of organic revenue growth between 11% and 13% and adjusted EBITA growth of between 18% and 23% were both confirmed. The share price is largely unmoved and remains undervalued to our unchanged EUR 168 fair value estimate. We expect the shift away from short-cycle transactional product sales toward stickier digital revenue and the company’s continuous focus on productivity improvements to support higher profitability than in the past.