Osram Licht AG (OSRD)

[Enterprising Investor]

Osram Stock as UBS Sees Technology Shift Helping Earnings (7/09/13)

By Weixin Zha - Jul 9, 2013 8:28 AM CT Facebook Share Tweet Osram Licht AG surged as much as 16 percent on the second day of trading as analysts at UBS AG said the company’s lighting technology and a corporate reorganization will boost earnings in years to come.

Osram was trading up 15 percent at 27.38 euros as of 3:26 p.m. in Frankfurt after rising to as high as 27.50 euros earlier in the day. That more than made up for a 0.8 percent decline yesterday, when the stock debuted after the manufacturer’s spinoff from engineering company Siemens AG. (SIE) Volume was 33 percent of the initial day’s total. The manufacturer is valued at about 2.86 billion euros ($3.68 billion).

Siemens separated from Osram as part of a drive to sell units with low profitability or growth prospects. Osram Chief Financial Officer Klaus Patzak said yesterday that the lighting producer needs to complete a restructuring before considering more acquisitions. The Munich-based company, which bought fixtures specialist Siteco in 2011, will shut or sell six plants in a drive to reach 1 billion euros in savings by 2015.

An industrywide shift to light-emitting diodes “offers exciting opportunities to drive both growth and profitability and, as the world’s second-largest lighting company, Osram is well placed to benefit,” Fredric Stahl and Guillermo Peigneux, Stockholm-based analysts at UBS, said today in a research report.

The analysts recommended buying Osram shares and estimated the stock price will reach 38 euros a share as “the key drivers for a re-rating of the shares are likely to be a successful restructuring and a return to growth in the second half of calendar 2013,” they said.

Michael Hagmann, an analyst at HSBC Holdings Plc, gave an overweight recommendation on Osram shares and estimated the stock at 34 euros, saying the spinoff has given Osram management “leeway in the restructuring process,” and that company margins have started to recover.

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To contact the editor responsible for this story: Angela Cullen at [e-mail]

http://www.bloomberg.com/news/2013-07-09/osram-stock-as-ubs-sees-technology-shift-helping-earnings.html