UBS has initiated coverage of Sixt SE (ETR:SIXG) with a “buy” rating, citing stronger cost efficiency, improved fleet management and realistic prospects for U.S. market share gains.
Shares of the Pullach-headquartered company were up 4% at 04:24 ET (08:24 GMT).
The German car rental company, which operates in Europe and North America, reported €4.0 billion in revenue in 2024.
UBS projects sales to rise to €4.3 billion in 2025 and €5.5 billion by 2029, representing a 7% compound annual growth rate.
Net earnings are forecast to grow from €244 million in 2024 to €325 million in 2025 and €515 million in 2029.
Diluted earnings per share are expected to increase from €5.20 in 2024 to €6.93 in 2025 and €10.97 by 2029.
UBS analysts said margin recovery is being driven by internal factors. “The margin recovery story is driven by fleet management, instead of the external pricing environment,” the note said.
The brokerage expects EBT margins of 11-13% between 2025 and 2027, compared with company guidance of about 10% for 2025 and consensus of 10.2%.
The EBIT margin is projected to rise from 12.1% in 2024 to 13.9% in 2025 and 15.7% in 2027.
UBS estimates that rental depreciation tailwinds from a refreshed fleet will add 130-250 basis points to margins.
Depreciation per unit per month fell below €300 in the second quarter, a trend analysts said supports long-term profitability. “We believe Sixt is now very well positioned to navigate residual value uncertainties regardless of the used car pricing environment,” they said.
Regional growth is expected to remain uneven. Revenues from Germany, which account for about 30% of the total, are forecast to grow 1-2% annually, while the rest of Europe, representing roughly 40%, is projected to grow 10% annually on strong inbound demand.
In North America, which makes up about 30% of sales, revenue is forecast to expand at an 8% annual pace as market share rises from 3% to 5% by 2029.
UBS noted that Sixt operates fewer than 10% of the stations of its larger U.S. rivals but generates revenue per station above €10 million annually.
Dividend payouts are projected to recover alongside earnings. The dividend per share is expected to rise from €2.70 in 2024 to €3.81 in 2025 and €6.03 in 2029, with a consistent payout ratio of 55%. The dividend yield is forecast to climb from 3.5% in 2024 to 7.4% in 2029.
Valuation metrics indicate upside potential. Shares closed at €81.05 on Sept. 3, giving the company a market capitalization of €3.40 billion.
UBS set a 12-month price target of €102, saying the stock is trading at 13 times consensus 2025 earnings, at the low end of its historical range of 12x to 19x.
The brokerage said, “a re-rating toward the historical average of 16x is likely as margin expansion materialises and gets recognised.”
UBS flagged risks including macroeconomic conditions, geopolitical tensions, trade policies, residual value fluctuations and aggressive fleet expansion by competitors.
Source :
https://www.investing.com/news/stock-market-news/ubs-initiates-buy-on-sixt-se-sees-margins-us-market-gains-driving-upside-4226081
