Deutsche Bank has initiated coverage of Skanska AB with a "buy" rating and assigned a target price of SEK300, highlighting an outlook of accelerating earnings and improving margins across the group's businesses.
Analyst Jonathan Coubrough set out a forecast in which Skanska would deliver a 15% compound annual growth rate in earnings per share across the fiscal years 2025 to 2028. That projection, Deutsche Bank says, rests in large part on a shift in the companys earnings mix toward its construction division.
According to the bank, construction is now the primary earnings driver for Skanska and benefits from a strong backlog and a trend of sustainable margin improvement. Coubrough described the construction arm as offering better predictability and noted that it is currently generating the bulk of the group's profits.
While Deutsche Bank sees the construction business as more stable, it also identifies project development as a source of further upside if conditions in that market improve. The bank emphasised that potential gains from project development are not included in its base-case forecasts, leaving additional value contingent on a recovery in that segment.
Deutsche Banks modeled mid-teens earnings growth is paired with a mid-cycle price-to-earnings multiple of 15x, which underpins the SEK300 target. The bank further suggested that if Skanska achieves its group targets, profits could double over the medium term.
The bank also pointed to shareholder returns, noting that Skanska paid a special dividend in 2025 that amounted to a 5.5% yield. Deutsche Bank indicated there is room for further special distributions, though it did not quantify timing or size beyond the 2025 payment.
Implications and context
Deutsche Banks initiation frames Skanska as a company with improving operational stability in its construction business, a clear driver of near-term earnings growth, and optionality in project development that could lift results if market dynamics turn favorable. The banks valuation approach couples a mid-teens EPS growth profile with a 15x mid-cycle P/E to derive its target price.
What the bank has highlighted:
- Forecasted 15% EPS CAGR for fiscal years 2025-2028.
- Construction now generates the majority of earnings and benefits from high backlog and margin improvement.
- Project development could provide additional upside not captured in current forecasts.
- A 2025 special dividend produced a 5.5% yield and there is scope for more special returns.