SKF stock rating upgraded to Buy by BofA on EU growth momentum

BofA Securities upgraded SKF AB to Buy from Neutral, raising its price target to SEK280.00 from SEK240.00, anticipating accelerated sales and profit growth. This positive outlook is driven by improving European short-cycle momentum and the planned 2026 spin-off of its automotive division, which currently represents 30% of sales and 10% of profits, thereby reducing a drag on the core business. The new price target implies approximately 20% upside potential, with BofA suggesting the remaining company could achieve higher growth despite its current 12x 2026 estimated price-to-earnings ratio aligning with its 15-year historical average.

Analysis

BofA Securities has upgraded SKF AB (SKFRY) to Buy from Neutral and raised its price target to SEK280.00, implying approximately 20% upside. The thesis is centered on a future acceleration in sales and profit growth, driven primarily by the planned 2026 spin-off of its underperforming automotive division. This segment currently accounts for about 30% of sales but only 10% of profits, acting as a significant drag on overall margins and valuation. The divestiture is expected to create a more focused, higher-growth core business with enhanced opportunities for strategic M&A. This corporate restructuring catalyst is complemented by improving European short-cycle momentum. Notably, the company's valuation of 12x estimated 2026 price-to-earnings is in line with its 15-year historical average, suggesting the market has not yet fully priced in the potential for margin expansion and accelerated growth post-spin-off.

Key Decisions for Investors

• Investors could consider the upgrade a signal to initiate or add to positions, as the stock's valuation at its historical average does not appear to reflect the potential for accelerated growth and margin expansion from the planned restructuring.
• The primary long-term catalyst is the 2026 spin-off of the automotive division; therefore, it is critical to monitor company communications for execution milestones and progress on this strategic separation.
• For relative value, investors should note that the same analyst maintains Kion as a top pick due to greater European exposure, suggesting an alternative for those prioritizing that specific macro theme or an opportunity for a pair-trade analysis.