Raute published its Q3 report this morning. The company exceeded our earnings estimates by a rather clear margin, which was mainly due to the strong profitability achieved in the Wood Processing equipment unit. Orders also clearly exceeded our forecasts, and demand comments had a more positive tone, but the order book, which has been declining for some time, is causing cost-saving pressures for the company next year. Raute naturally reiterated its fresh full-year guidance. On first impression, the overall picture of the report is positive in our opinion, although it is unlikely to give cause for a major forecast overhaul.
Viljakainen interviewed Raute’s CEO Mika Saariaho after the Q3 earnings release.
Topics:
00:00 Introduction
00:08 Third quarter development
01:15 Strong profitability in Wood Processing
02:42 Service development
04:21 Does Q3 order intake indicate improving demand?
05:30 Positive outlook for next year
06:39 What does the sales pipeline look like for large projects?
08:55 Competition and pricing situation
09:41 Have any deals been lost?
10:20 Raute’s market share
11:03 Current strategy
12:41 Drivers behind the guidance
Antti Viljakainen has written a new company report on Raute following Q3.
We reiterate our Accumulate recommendation and EUR 17.00 target price for Raute. Raute’s Q3 report slightly alleviated concerns about the future, particularly thanks to the good order flow given the circumstances, but we did not make significant forecast changes after the report. In our view, Raute’s valuation is attractive when viewed through all key valuation metrics, even though earnings are expected to decline next year. Consequently, we see the expected return of the stock, consisting of valuation upside and dividend, as higher than the required rate of return.
Quoted from the report:
Raute’s balance sheet remains very strong and the worst is likely already over regarding cash flow
Raute’s equity ratio was at a solid level of 65% at the end of Q3 (cf. target over 40%). Net gearing was clearly negative at -50% in Q3, similar to the comparison period. Raute’s operating cash flow was EUR 19 million negative for the first nine months, as advances decreased sharply due to project progress and weak order intake. However, Q3 was marginally positive in terms of cash flow, which was an even better outcome than expected relative to our full-year forecast. We estimate that the company’s working capital levels normalized during Q3, as working capital turned positive for the first time in a long while. However, a clear turn for the better would require the recovery in the equipment project business to continue during the winter, which would bring particularly new advance payments to the balance sheet.
Here are Antti’s preview comments as Raute reports its Q4 results on Thursday
In our estimation, Raute’s Q4 result has been strong. The focus of the report is on the 2026 guidance, as the significant decrease in the order book throughout the year creates uncertainty for the volume levels of the current year. We expect Raute to guide for business contraction and a decrease in earnings, but in our opinion, the stock has priced in an overly sharp earnings slump (2026e: EV/EBIT 5x). After an extremely strong earnings year in 2025, we expect Raute to increase its dividend by just under 20% to EUR 0.65 per share, but a slightly more aggressive hike or bolstering profit distribution with a share buyback program are, in our view, possible outcomes.
We’ll see. Raute has indeed surprised positively before. The CEO certainly seemed quite confident, at least in the interviews after the latest results.
Here are Viljakainen’s quick comments on this morning’s results.
The company slightly exceeded our estimates, which was mainly due to the abnormally high profitability of the Wood Processing equipment unit and strong cost management in Services. New orders were again weaker than expected in a difficult market situation. Our forecasts were within the downward guidance ranges provided by Raute for this year, although regarding the result, we are at the upper end of the wide range. The dividend proposal rose exactly in line with our estimates to EUR 0.65 per share.
The announcement regarding the share buybacks went unnoticed amidst the earnings reports, so there was no mention of it in the comment. In itself, I did hint at the idea in the preview, so this wasn’t a major surprise. Without taking a stance yet on any potential changes to forecasts or views following the report (as these haven’t been made yet), at Raute’s revenue-based valuation calculated from the guidance (EV/S around 0.4x), buying back shares is a very justifiable move.
Here is the fresh company report on Raute from Chief Analyst Antti this evening.
We reiterate our Accumulate recommendation for Raute and adjust our target price to EUR 16.0 (prev. EUR 17.0) in line with slight forecast changes. We added some margin of safety to our forecasts due to the order intake and guidance falling short of Q4 expectations. Raute’s valuation is, in our opinion, inexpensive across all key valuation metrics, provided that the bottom of demand is behind us as estimated by both us and the company. We see Raute’s expected return, consisting of valuation upside and dividends, as higher than the required rate of return.
Quote from the report:
Raute’s balance sheet remains very strong
The company’s net cash position at the end of the year was at a higher level than our estimate, at EUR 38 million, thanks to better-than-expected Q4 cash flow. Raute’s equity ratio was at a solid level of 66% at the end of Q4 (cf. target over 40%). The gearing (net debt-to-equity ratio) was, as in the comparison period, clearly negative at -66% in Q4. Consequently, the company’s balance sheet is very strong. The dividend proposal was EUR 0.65 per share in line with our forecasts, in addition to which the company intends to buy back its own shares for a maximum of EUR 1.5 million (max. 1.7% of the share capital). In our view, Raute’s balance sheet can very well afford this level of profit distribution.
A year ago, Raute’s share looked blatantly undervalued, but the share hasn’t practically moved anywhere in a year, as the cycle turnaround has taken longer than expected with the continued slump in the construction sector. So, there has been no rush to jump on this train yet, but once the cycle turns (and surely it will turn eventually), the share looks very cheap. We discussed Raute’s situation on video today with @Antti_Viljakainen!
Raute’s 2026 revenue is estimated to be EUR 125–160 million and comparable EBITDA is estimated to be EUR 10–19 million.
Previous guidance for 2026 (published Feb 12, 2026):
Raute’s 2026 revenue is estimated to be EUR 135–170 million and comparable EBITDA is estimated to be EUR 10–19 million.
Grounds for the new guidance:
Global economic and geopolitical uncertainty has continued to increase during the first quarter, which has led to further postponement of customers’ investment decisions and delayed the recovery of Raute’s order intake. At the same time, Raute’s continued strong operational performance and cost savings allow the comparable EBITDA guidance to remain unchanged.
This isn’t a huge surprise based on the recent news flow, as the rise in market interest rates inevitably delays the recovery in construction. Maintaining profitability is, however, good news, as it hasn’t been many years since Raute needed roughly EUR 150 million in revenue to reach a break-even result. Overall, the warning is very mild, but the prolonged stalling of orders could certainly also be reflected in next year’s performance. An updated view and Q1 preview will be out by Monday.
Here is the pre-earnings report on Raute from Antti, as the company will release its Q1 results on Thursday, May 7th.
On Friday, Raute issued a slight negative profit warning regarding its revenue for the current year, as the recovery in demand has been delayed due to macro-driven reasons. The company maintained its earnings guidance, but due to the lower revenue forecasts, we have also positioned our earnings estimates closer to the lower end of the range. However, we believe the low valuation (2026e EV/EBIT 7x) continues to act as a shield for the stock.
Here are Viljakainen’s quick comments on this morning’s results
Raute released its Q1 report this morning. The company clearly exceeded our earnings forecasts, which was thanks to the abnormally high profitability of the Wood Processing equipment unit. New orders, meanwhile, fell slightly short of our already low expectations in a difficult market situation, driven by the struggling global construction sector. The company naturally reiterated its recently fine-tuned full-year guidance. Preliminarily, we do not expect this two-sided report to create an immediate need for significant changes to our short-term forecasts for Raute.
