Schneider Electric Sees Strong Growth in Q3 2024

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Schneider Electric Sees Strong Growth in Q3 2024

Schneider Electric SE (SU.PA) reported a significant increase in revenue for the third quarter of 2024. Organic growth reached a record level of €9.3 billion, up 8% year-over-year.

This growth was primarily driven by strong demand in the Energy Management sector, particularly from data centers and signs of recovery in Industrial Automation in China. Despite facing certain challenges, the company maintained its full-year guidance and announced strategic acquisitions to strengthen its market position.

Key Points:

  • Schneider Electric's Q3 2024 revenue reached a record €9.3 billion, showing 8% organic growth year-over-year.
  • Strong demand in Energy Management, especially from data centers, and signs of recovery in Industrial Automation in China contributed to this growth.
  • North America and the Rest of the World showed robust double-digit growth, while the Asia Pacific recorded modest growth.
  • The company announced the acquisition of a 75% stake in Motivair to enhance AI data center cooling capabilities.
  • A joint venture was established with StarCharge to develop EV charging infrastructure.
  • Full-year guidance includes 6% to 8% organic revenue growth and 60 to 80 basis points of adjusted EBITDA margin expansion.
  • The €207 million fine from the French Competition Authority will be appealed but is expected to affect 2025.

Company Outlook: Schneider Electric maintains its full-year guidance for 6% to 8% organic revenue growth, with adjusted EBITDA margin expansion expected to be 60 to 80 basis points. Overall revenue growth is anticipated to be between 9% and 13%.

Negative Highlights:

  • Industrial Automation revenues declined by 6% due to weak discrete automation sales and AVEVA's transition challenges.
  • Growth in the Asia Pacific was modest at 2%, with a decline noted in China.
  • Europe is experiencing project delays in the Data Center sector.
  • Margins in Industrial Automation are under pressure due to low volumes and product mix.

Positive Highlights:

  • The Systems business showed strong double-digit growth.
  • Software and Services increased by 7%, with AVEVA's ARR growing by 15%.
  • The US market continues to demonstrate strong growth in Process Automation.
  • Data Center sales remain strong due to robust demand in the US and Asia Pacific.

Concerns:

  • The decline in Discrete Automation contrasts with strong performance in other sectors.
  • Project delays in Europe are impacting the Data Center business.

Q&A Highlights:

  • Management is focusing on addressing low volumes and product mix in Industrial Automation.
  • AVEVA's transition to subscription and SaaS models is expected to normalize by 2027.
  • The company is monitoring potential trade tariff impacts between the US and China.

In summary, Schneider Electric's Q3 2024 performance was highlighted by robust revenue growth, strategic acquisitions, and a stable outlook for the year. Despite facing some challenges, the company is taking steps to adapt to market conditions and capitalize on new opportunities in Energy Management and Industrial Automation.

InvestingPro Forecasts: Schneider Electric's strong Q3 2024 performance reflects its impressive market position and financial metrics. According to InvestingPro data, the company has a significant market value of $145.84 billion, emphasizing its status as a major player in the Electrical Equipment industry. This aligns with the record revenue of €9.3 billion reported for the quarter.

The company's 1.99% revenue growth over the past twelve months, although modest, is consistent with the organic growth mentioned in the article. More importantly, Schneider Electric's 3.06% quarterly revenue growth as of Q2 2024 indicates an acceleration in performance, aligning with the highlighted 8% organic growth at the end of Q3.

InvestingPro Tips reveal that Schneider Electric has maintained consecutive dividend payments for 29 years and increased its dividend for ten consecutive years. This demonstrates the company's financial stability and commitment to shareholder returns, which is particularly noteworthy despite challenges faced in segments like Industrial Automation.

The company's strong financial position is further evidenced by profitability over the last twelve months and analysts' earnings forecasts for the current year. This aligns with Schneider Electric's retained full-year guidance and expected margin expansion.

It is worth noting that Schneider Electric is trading at a high earnings multiple of 34.88. This may indicate that investors have high expectations for future growth, likely stemming from the company's strong performance in Energy Management and strategic acquisitions such as Motivair and StarCharge.

For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional insights on Schneider Electric, providing a deeper understanding of the company's financial health and market position.