SKF Earnings: Pleasing Profit Margin Progression in Early 2024 Despite Weakened Top-Line Result

We make no change to our SEK 220 fair value estimate for narrow-moat SKF following delivery of first-quarter 2024 results, which tracked broadly in line with our full-year forecasts and company guidance. Organic sales declined by 7%, reflecting a broad-based weakening of demand for SKF’s industrial and automotive bearings amid challenging market conditions. Still, SKF delivered a pleasing 30 basis points of EBIT margin progression to 13.4% despite the easing of the top line in the first quarter. Lower raw material costs and easing labor cost inflation for the automotive segment largely accounted for the improvement in EBIT margin performance in early 2024.