Citi downgrades Knorr-Bremse stock to neutral on US truck market concerns

Citi downgraded Knorr-Bremse AG (KBX) to neutral from buy, lowering its price target to €92.00, citing significant concerns over weak U.S. truck market data. The firm anticipates potential headwinds and a negative risk/reward for the stock in the second half of 2025, projecting mid-single-digit downside to Knorr-Bremse’s 2025 adjusted EBIT, as poor U.S. Class 8 truck orders are unlikely to be sufficiently offset by European market performance. Citi has initiated a negative catalyst watch, expecting near-term truck market dynamics to be the primary stock driver.

Analysis

Citi has downgraded Knorr-Bremse AG (KBX) to neutral from buy, reducing its price target to €92.00 from €97.00, based on deteriorating U.S. truck market fundamentals. The primary driver for the downgrade is poor U.S. Class 8 truck order data, which suggests a recovery in the company's truck segment is unlikely in the second half of the year. While European markets are performing better, they are not expected to sufficiently offset the weakness in the U.S. Consequently, Citi anticipates a negative risk/reward profile for KBX shares heading into the second half of 2025 and projects a mid-single-digit downside to the company's 2025 adjusted EBIT. The bank has initiated a negative catalyst watch, anticipating that near-term truck market dynamics will be the main factor influencing the stock over the next six months. Furthermore, there is a risk that Knorr-Bremse may narrow its fiscal year 2025 margin guidance to the lower end of its target range, and the benefits of its internal cost-saving initiatives are not expected to become apparent until 2026.

Key Decisions for Investors

• Investors should exercise caution, as Citi's downgrade and the initiation of a 'negative catalyst watch' signal heightened near-term risk ahead of the company's first-half results.
• Closely monitor incoming U.S. Class 8 truck order data, as this specific metric has been identified as the primary performance driver for the stock over the next six months.
• Re-evaluate positions in light of the projected mid-single-digit downside to 2025 adjusted EBIT and the potential for a downward revision to FY2025 margin guidance.
• Consider that a positive re-rating of the stock is unlikely until 2026, as the financial benefits of the company's internal improvement initiatives are not expected to materialize before then.