Summary: Goldman Sachs shifted its recommendation on Atlas Copco AB to Neutral from Buy and trimmed the one-year price objective to SEK184.00 from SEK186.00. The firm highlighted foreign exchange and tariff pressures as the primary offsets to anticipated growth in the firm’s Vacuum Technique business, while citing valuation and earnings trajectory concerns.
In its review, Goldman Sachs referenced valuation multiples that point to a premium market price. According to InvestingPro data cited by the bank, Atlas Copco currently trades at a price-to-earnings ratio of nearly 30 and an enterprise-value-to-EBITDA multiple of 21.3.
The bank’s analysis focused on division-level dynamics. The Vacuum Technique segment - which accounts for 22% of Atlas Copco’s sales - is expected to gain from a recovery in the semiconductor industry, with Goldman Sachs projecting a 2025-28 compound annual growth rate of 15% for that exposure. However, Goldman noted that the company’s Industrial Technique division, which represents 10% of sales and is more tied to the auto sector, faces more subdued prospects.
Goldman Sachs analyst Daniela Costa warned that the combination of currency moves and tariff-related costs could offset the benefits from semiconductor demand. The firm projected that these headwinds would contribute to an earnings-per-share compound annual growth rate for 2025-29 that falls below the sector average. At the adjusted EBIT level, Goldman Sachs sees potential downside to consensus estimates for 2026 of approximately 2%.
Performance since the bank initially placed Atlas Copco on its Buy list is noted in the downgrade rationale. Since being added to Goldman Sachs’ Buy list on December 16, 2020, Atlas Copco shares have risen by about 75%, outperforming the FTSE World Europe index, which climbed roughly 58% over the same span. The stock has also delivered a 38.7% return in the past six months.
Despite that price appreciation, InvestingPro data indicates the stock appears overvalued relative to its Fair Value. The company continues to pay a dividend, offering a yield of 1.73%, and has distributed dividends for 47 consecutive years.
Key takeaways:
- Goldman Sachs downgraded Atlas Copco from Buy to Neutral and lowered its price target to SEK184.00 from SEK186.00.
- Valuation metrics show a premium – P/E nearly 30 and EV/EBITDA of 21.3 per InvestingPro data.
- Foreign exchange and tariff pressures are expected to partially offset growth in Vacuum Technique, which makes up 22% of sales and faces a projected 2025-28 CAGR of 15%.
Impacted sectors: Industrial equipment manufacturers, semiconductor supply chain, and capital markets valuation assessments.
Risks and uncertainties:
- Currency volatility and tariff developments could reduce expected gains from the semiconductor-exposed Vacuum Technique division - impacting industrial and technology-adjacent sectors.
- Muted prospects in the auto-exposed Industrial Technique division, which constitutes 10% of sales, add downside risk to medium-term earnings growth.
- Consensus adjusted EBIT estimates for 2026 may be at risk, with Goldman Sachs estimating potential downside of approximately 2% at that level.
This analysis preserves the firm-level figures, division weightings, and performance history referenced by Goldman Sachs. It reflects the bank’s view that, despite strong past share performance, Atlas Copco faces a combination of valuation and operational headwinds that warrant a more cautious rating.