Knorr-Bremse stock rating cut to neutral by JPMorgan on valuation

JPMorgan downgraded Knorr-Bremse (KBX) to Neutral from Overweight, maintaining its EUR93.00 price target, citing limited upside following the stock's 21% year-to-date outperformance. The bank anticipates downside to Q2 consensus estimates driven by North American truck market weakness and foreign exchange headwinds, leading to lowered 2025/26 operating EBIT estimates by 3-5% and projecting orders, revenue, and adjusted EBIT 3-5% below consensus. Furthermore, JPMorgan sees limited near-term benefits from German stimulus and a lack of catalysts for continued outperformance in the second half of the year.

Analysis

JPMorgan has recalibrated its outlook on Knorr-Bremse AG (ETR:KBX), downgrading the stock to Neutral from Overweight while maintaining its EUR93.00 price target. The revision is primarily driven by a valuation assessment following the stock's significant 21% year-to-date appreciation, which has outpaced both the broader sector and its key customer markets. The bank anticipates near-term headwinds, projecting that Knorr-Bremse's second-quarter results will miss consensus estimates, with orders, revenue, and adjusted EBIT expected to be 5%, 3%, and 3% lower, respectively. This cautious stance is underpinned by identified weakness in the North American truck market and adverse foreign exchange movements. Consequently, JPMorgan has lowered its operating EBIT forecasts for 2025 and 2026 by 3% and 5%. The analysis concludes that there is a lack of significant catalysts in the second half of the year to fuel further outperformance, and any potential benefits from German stimulus measures are expected to be limited in the near term.

Key Decisions for Investors

• Given the downgrade to Neutral based on limited upside after a 21% year-to-date run, investors holding the stock should consider trimming positions to lock in recent gains.
• Monitor Knorr-Bremse's upcoming Q2 earnings report closely for any signs of weakness in the North American truck market and the disclosed impact of foreign exchange rates, which are the core risks highlighted in the downgrade.
• Potential investors should exercise caution before initiating new long positions, as the analysis points to a lack of near-term catalysts and a less favorable risk/reward profile until a price correction or new positive developments emerge.