Volvo downgraded by Goldman Sachs on softer demand for European trucks

Goldman Sachs downgraded Volvo to 'neutral,' citing a softening outlook for European truck manufacturers due to weak order momentum, with U.S. Class 8 truck orders down 25% year-to-date and book-to-bill ratios below one. The firm projects 2025 truck deliveries to decline 18% in the U.S. and 10% in Europe, leading to revised EBIT forecasts significantly below consensus for Volvo and other OEMs like Daimler Truck and Traton, indicating a challenging period for the sector until a meaningful uptick in orders.

Analysis

Goldman Sachs has downgraded Volvo (ST:VOLVb) to “neutral,” reflecting a significant softening in the European and U.S. truck markets. This view is supported by Goldman's proprietary truck barometer, which indicates weak order momentum, evidenced by a 25% year-to-date decline in U.S. Class 8 truck orders and sector-wide book-to-bill ratios falling below one in the second quarter. The brokerage projects a cyclical downturn with 2025 truck deliveries falling 18% in the U.S. and 10% in Europe, a forecast notably weaker than company guidance. Consequently, Goldman's adjusted EBIT estimates for Volvo in 2025 and 2026 are 9% to 10% below consensus. Specific headwinds for Volvo include potential tariff impacts and margin pressure on its U.S.-importing construction equipment division, especially with the risk of Section 232 tariffs in 2026. This pessimistic outlook extends across the sector, with Goldman cutting EBIT forecasts for Daimler Truck due to high inventories and for Traton on signs of weakness in Europe and Brazil, suggesting broad-based downside risk to 2026 consensus estimates for all major OEMs until order flow stages a meaningful recovery.

Key Decisions for Investors

• Investors should re-evaluate bullish positions on Volvo, as Goldman Sachs' 'neutral' rating and SEK298 price target imply limited 7% upside that may not justify the near-term risks of earnings misses and tariff headwinds.
• Given the sector-wide downturn, consider reducing exposure to European truck OEMs like Daimler Truck and Traton, as consensus estimates for 2026 are viewed as overly optimistic and vulnerable to downward revisions.
• Closely monitor leading indicators such as U.S. Class 8 truck orders and European order momentum, as a significant uptick is the key catalyst required for the sector to outperform the broader capital goods market.
• For those holding positions, it may be prudent to review exposure relative to the broader capital goods sector, as underperformance is expected until the order cycle inflects positively.