Elekta Reports Strong Q1 Results

Shares of Elekta (ST:EKTAb) jumped on Wednesday, following its first quarter results.

At 5:30 am (0930 GMT), Elekta was trading 5.7% higher at SEK 72.95.

The company’s quarterly results exceeded expectations in sales and profitability, providing a much-needed boost to its stock, which had experienced significant declines in recent months.

Key Financials

Elekta’s First quarter results were marked by a 10% increase in order intake at constant currency (CER), well above the consensus expectation of no growth. This order growth was largely driven by a significant $38 million contract in Mexico.

• Sales: Totaled SEK 3,825 million, surpassing the consensus estimate of SEK 3,689 million by 4%.
• Organic Sales Growth: Reached 0.8%, exceeding the anticipated decline of 2.9%.
• Adjusted Gross Margin (GM): Recorded at 37.8%, ahead of the consensus estimate of 36.8%.
• Adjusted EBIT: Amounted to SEK 283 million, representing a 23% beat over the consensus estimate of SEK 230 million, resulting in an adjusted EBIT margin of 7.4%, compared to the expected 6.2%.
• Adjusted Diluted Earnings Per Share (EPS): Came in at SEK 0.41, beating the consensus of SEK 0.32 by 27%.

Regional Performance

• Americas: Saw a 16% increase in orders.
• EMEA: Faced a 12% decline, driven by tough comparisons from large installations in Spain and Italy.
• APAC: Posted a 3% growth, bolstered by strong performance in India and Korea, though China continued to face challenges due to the ongoing anti-corruption campaign.

Product Mix and Profitability

Elekta’s sales mix shifted towards Services, which grew by 5%, while Solutions saw a 3% decline. The company faced margin pressure, with the gross margin declining 380 basis points year-over-year due to inflationary pressures and reduced inventory revaluation impacts.

However, the company has implemented measures to improve profitability, including price hikes and cost-saving initiatives, leading to a sequential improvement in gross margin.

Future Guidance

Elekta reaffirmed its FY24/25 guidance, expecting mid-single-digit (MSD) revenue growth, compared to the consensus forecast of 3.5%, along with EBIT margin expansion. The company anticipates weaker H1 results, with a rebound in sales and profitability in H2 driven by new product launches and productivity improvements. Elekta aims to achieve an EBIT margin of 14% or higher by FY27/28, supported by strong customer interest and growing demand for its cancer care solutions.

Analysts at J.P. Morgan noted that capturing the beat to adjusted EBIT implies approximately 2% upgrades to consensus adjusted EBIT for the full-year.

Analyst Sentiment and Stock Performance

Despite the positive results, brokerages flagged ongoing risks, such as visibility issues, slower installations, exposure to China, and supply chain disruptions. Jefferies analysts emphasized that Elekta’s Q1 results exceeded expectations and should help the company’s shares recover some losses from the past three months.

With shares down over 21% in the past three months and 16% year-to-date, the stronger-than-anticipated start to the year is seen as a significant boost. Analysts expect the recovery in Elekta’s stock to likely continue as the company navigates its fiscal year with improved performance.