Key insights
- UBS downgraded Wärtsilä due to peaking datacenter cycle concerns and increased competition from Caterpillar and Cummins. While 2026 order intake estimates were raised, 2027 and 2028 estimates were cut. This highlights potential headwinds for companies reliant on datacenter growth, a sector relevant to US equities, though the direct impact is limited.
Investing.com -- UBS downgraded Finnish engine maker Wärtsilä to “neutral” from “buy” on Thursday, citing a more balanced risk/reward after the stock doubled over the past 12 months, while maintaining its €40 price target against a share price of €36.53 as of May 27.
"2026 could be peak order momentum and we do not see the November CMD as a major positive catalyst," UBS analysts said, citing intensifying competition in datacenters, peak cruise shipyard orders, a mixed setup in other marine segments and an unresolved energy storage situation.
Wärtsilä has won 2.4 gigawatts of datacenter orders to date, with UBS projecting datacenter orders will account for 27% of total order intake in 2026.
UBS forecast Energy original equipment orders peaking at 4.5 gigawatts this year before declining, with datacenter-specific orders expected to fall from 1.8 gigawatts in 2027 to 1.2 gigawatts by 2030.
Competitors Caterpillar and Cummins are raising capacity by three times and one time respectively, compared to Wärtsilä’s one time expansion, UBS noted, while Hyundai, Weichai and fuel cell makers are gaining ground.
UBS raised its 2026 Energy OE order intake estimate by 41% to €3.11 billion but cut 2027 and 2028 Energy OE order estimates by 9% and 11% respectively to €2 billion and €1.95 billion. Group revenue estimates were trimmed 1%-2% across 2026-2028 to €6.76 billion, €7.38 billion and €8.25 billion respectively.
UBS projected group EBIT rising to €910 million in 2026, €1.06 billion in 2027 and €1.22 billion in 2028, with margins expanding from 13.5% to 14.3% to 14.7% over the same period.
Its 2027 and 2028 EBIT estimates stand 5% above consensus, though UBS said the gap derives largely from the lower-multiple marine unit rather than the higher-multiple energy division.
The €40 sum-of-the-parts valuation applies 15 times 2027 EBIT to the core business, yielding €29 per share, plus €8 per share for datacenters, €2 for navy and €1 for energy storage.
The upside case of €56 assumes a sustainable datacenter order rate of 2.4 gigawatts and a 17.5 times multiple. The downside case of €26 assumes 0.8 gigawatts of datacenter orders and a 10.5 times multiple, implying 29% decline from current levels.
The stock traded at 31.7 times 2026 estimated earnings and 19.2 times EV/EBITDA, with UBS forecasting diluted EPS of €1.15 in 2026, rising to €1.33 in 2027 and €1.54 in 2028.
The dividend per share is forecast at €0.60 in 2026, up to €0.70 in 2027, implying a 1.6% yield. Net cash stood at €2.01 billion at end-2025 and is forecast at €1.51 billion in 2026. Wärtsilä will announce new mid-term targets at its November capital markets day.
It currently targets a 14% combined marine and energy EBIT margin, against UBS projections of 17% for energy and 15% for marine. The upside-to-downside ratio stands at 1.8 to 1.