Key Morningstar Metrics for Vestas Wind Systems
- : DKK 175Fair Value Estimate
- : ★★★Morningstar Rating
- : NoneMorningstar Economic Moat Rating
- : HighMorningstar Uncertainty Rating
What We Thought of Vestas Wind Systems’ Earnings
Vestas reported first-quarter group EBIT of €127 million, well ahead of company-compiled consensus. Power solutions was the main contributor, returning to profitability in a seasonally weaker quarter for the first time since 2018, as offshore wind ramped up. Full-year guidance was confirmed.
Why it matters: Despite the strong set of results, shares were flat in May 6 trading, likely reflecting investor concerns about the decline in service revenue and the 170-basis-point margin contraction amid the negative impact of ongoing turnaround measures and lower contract activity in Europe, the Middle East, and Africa.
- Service profitability remained under pressure as contract renegotiations, multibrand exits, and cost-out initiatives weighed on revenue, leading to fixed-cost underabsorption despite a 10% reduction in operating costs.
- In power solutions, management said offshore operations remained loss-making in the quarter, in line with our expectations. That said, higher deliveries of 812 megawatts, from 263 MW a year ago, and improved manufacturing efficiency supported fixed-cost dilution, underpinning segment outperformance.
The bottom line: We confirm our DKK 175/€23.50 fair value estimate and no-moat rating for Vestas. At current levels, we view shares as fairly valued. Management reaffirmed its 2026 EBIT margin guidance of 6%-8%; our estimate remains at the lower end of the range.
- While progress in the service turnaround plan weighed on short-term profitability, we view the strategy as supportive of long-term margins. Still, we see the 25% long-term service margin target as challenging. Reducing the lost production factor will be key to mitigating warranty-related costs.
- We continue to view offshore execution as the key driver of medium-term profitability. Improving manufacturing productivity and growing delivery volume should progressively support operating leverage over the next two years, with the segment expected to reach profitability in 2027.
