Kone Q3'25: Earnings growth expectations already reflected in share price

Translation: Original published in Finnish on 10/27/2025 at 8:15 am EET.

KONE's Q3 result was quite in line with both our expectations and the consensus, though orders received were slightly above expectations. The company's guidance for the current year also remained practically unchanged, except for a slight positive revision to the revenue guidance. Reflecting this, the estimate changes remained marginal as well. Due to the increase in the share price, we consider the share to be fully priced and reiterate our Reduce recommendation, while revising our target price to EUR 56 (was 55 euros) in line with our slightly higher forecasts. 

Q3 earnings in line with expectations, positive momentum in orders

KONE's revenue remained stable in Q3, which was slightly below our expectations but largely in line with consensus. Meanwhile, the company's adjusted EBIT was 341 MEUR, which fell between our and the consensus forecasts. This corresponded to an adjusted EBIT margin of 12.3%, which was fully in line with our forecast. In turn, reported order intake (2,140 MEUR, +3.0% y/y) slightly exceeded both our expectation (2,089 MEUR) and the consensus expectation (2,066 MEUR). In comparable currencies, growth was as high as 7.8% year-on-year. According to the company, orders grew by double digits at comparable exchange rates in all areas outside of Greater China. The margin of orders received, in turn, remained stable year-on-year. 

Only a small clarification to the guidance

In connection with the report, the company specified its guidance for this year and now estimates revenue growth to be 3-5% in comparable currencies (was 2-5%). Conversely, it expects the adjusted EBIT margin to be within the range of 11.8% to 12.3% (was 11.8-12.4%). Overall, as expected, the guidance for the current year remained practically unchanged, apart from a slight positive adjustment to the revenue guidance. Similarly, the market outlook was updated only for New Building Solutions in North America, and the market is now expected to grow slightly (was “remain stable”). Thus, the situation for New Building Solutions in North America appears to have normalized quite quickly as the year progressed (cf. the company last raised its outlook in Q2). Otherwise, the outlook was unchanged and especially the modernization market is expected to grow rapidly in all geographical areas. In China, the company expects New Building Solutions to continue declining at a double-digit rate this year. The preliminary comments for next year also remained on a generally similar note to the current ones.

Against this backdrop, our estimate changes were minor, and we estimate that the company's revenue will continue to grow by just under 2% this year, with the adjusted EBIT margin settling at 12.1%. The guidelines for our longer-term estimates also remain unchanged, except for a slight increase in margin estimates. We expect KONE to continue to achieve the targeted margin improvement (2027 adj. EBIT-%: 13-14%) within the target schedule through efficiency measures and an improved sales structure.

We believe the share is tightly valued

Based on our updated estimates, KONE's EV/EBIT multiple for next year that considers its strong balance sheet is approximately 19x and the corresponding P/E ratio is approximately 26x. While we believe these multiples are at a justified level for a defensive quality company like KONE, we find it difficult to see significant upside in them without the realization of faster earnings growth than we expect. This is reflected by the fact that, despite a good earnings growth rate in the coming years (adjusted EBIT growth 2026e-27e 10-11% per year), the valuation with 2027 estimates (2027e P/E: 23x, EV/EBIT: 17x) remains in the range of levels we consider neutral (P/E: 24x-27x, EV/EBIT 17x-21x). Our view of the stock being fully priced is also supported by our DCF model, which emphasizes long-term potential and is roughly in line with our target price.