Legrand Earnings: Uncertainty in End Markets Keeps Full-Year Guidance Unchanged Despite Strong Start

Narrow-moat Legrand delivered organic revenue growth of 7% during the first quarter, which was entirely driven by pricing (8% higher year over year), helping to offset marginally lower volumes. Similar to other capital equipment peers, the spillover effect of price increases already implemented also supported margin expansion. Operating margin expansion of 230 basis points to 22.6% from higher pricing reflects the group’s brand reputation and close relationships with distributors and installers, which has allowed its pricing to stick despite a deteriorating macroeconomic environment. While first-quarter operating performance was ahead of management’s expectations, full-year guidance was kept unchanged due to uncertainty in the outlook for its end markets (which is heavily weighted towards residential and office buildings) and limited backlog visibility. We maintain our EUR 83 fair value estimate and view shares as fairly valued.