Investing.com -- Shares of Wärtsilä Corporation (HE:WRT1V) fell sharply, plunging 15% today, as the company's Q3 earnings, while ahead of consensus on several measures, missed EPS expectations when adjusted for one-off gains.
Analysts at RBC Capital Markets said that the earnings beat was largely driven by exceptional items rather than sustainable improvements, cautioning that the report’s mixed quality and disappointing order numbers raise concerns about Wärtsilä’s forward momentum.
In its results, Wärtsilä reported an adjusted operating profit of €192 million, a 16% beat on consensus estimates.
However, the positive impact of a €29 million provision release related to last year’s Trieste plant closure skewed these figures upward.
Adjusting for these one-time items, RBC analysts noted that operating profit actually came in slightly below expectations, flagging underlying challenges in key segments.
The company’s overall book-to-bill ratio stood at 1.05x, underperforming the 1.12x consensus expectation, signaling softer-than-anticipated order growth.
The Marine division, which reported positive year-over-year growth, saw orders fall 4% below analyst forecasts.
Wärtsilä pointed to a less favorable mix between equipment and services, which also weighed on profit margins.
Although the company reaffirmed its positive outlook for the Marine market, where shipyard capacity remains constrained, segment margins missed targets, landing at 10.4% versus a 12.1% consensus estimate.
The Energy division showed more resilience, with sales outpacing expectations due to a significant increase in equipment deliveries, up 50% year-over-year.
Despite a 29% shortfall in order intake, this division’s operating margin benefited from improved energy storage profitability and solid service volume growth.
However, with a BtB ratio of 0.7x, particularly impacted by a steep decline in energy storage orders, questions linger around the division’s capacity to maintain this performance as storage projects become “lumpier” in timing, as per Wärtsilä.
Wärtsilä has offered only cautious guidance, reiterating a modest improvement in the demand environment over the next 12 months but refraining from the more detailed forecasts analysts had hoped for.
RBC Capital Markets flagged the guidance as a key reason for its lukewarm "sector perform" rating on the stock, adding that the company's hesitance in confirming typical Q4 seasonality raised red flags, especially with consensus estimates still pointing to a 12% operating margin expectation for the fourth quarter.