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Husqvarna AB - Fundamental Investment Case

Research

Publication Date: 26 Mar 2019 - By Robert Prather By Robert Prather
Actionable
Differentiated

Equity Fundamental Equity USA Consumer

Husqvarna AB manufactures outdoor maintenance and recreational products.  Husqvarna has a wide variety of products including chain saws, trimmers, blowers, commercial lawn mowers, tillers, generators, snow blowers, stump grinders, and utility vehicles. Husqvarna claims they are the global leader in robotic lawn mowers, number two in professional chain saws and number one in European consumer watering systems. The company has a number of brands but under a new restructuring plan will focus increasingly on the Husqvarna and Gardena brands

Please download the full report for details on the Bear Case outlined below.

Qualitative Concerns:

  • Stanley Black and Decker is making a huge push into lawn care products after their purchases of Craftsman and MTD. 
  • Competition is increasing in robotic lawn mowers from iRobot, Bosch, Honda, Worx, and many more. 
  • The company's best segment, Gardena, saw a huge benefit from weak rainfall in Europe making 2019 comparisons extremely difficult. 
  • Husqvarna, previously with huge market share in most of their products, could face market share losses as sales in most products shift to electric alternatives. Home Depot for example already appears to have moved away from the company.

Fundamental Concerns:

  • Husqvarna is touting the exit of some weak consumer sales (roughly 4%) as a means to turnaround results. 
  • However, sales growth has been weakening for multiple quarters even in the large Husqvarna division. 
  • Gross margins appear to be deteriorating. Leading to operating margin and EBITDA margin compression in most segments. 
  • The trend does not appear to be reversing with inventory continuing to build.
  • OCF and FCF continue to weaken for multiple quarters. 
  • Estimates appear to be pricing in a massive recovery on operating results outside of the exited consumer business.

Bottom Line: Industrial and consumer manufacturer facing intense competition, especially in one of their most popular products, and a shift to electric alternatives.

Husqvarna AB - Fundamental Investment Case

Source: VR Fundamental

Pages: 58

Released: 26 Mar 2019

Unlock for 35 credits

The Author

Robert Prather

Equity Analyst

Technology, Telecom & Media, Industrials, Consumer

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