J.P. Morgan moved Signify NV (AS:LIGHT) down one notch on its recommendation scale, from "overweight" to "neutral," saying the companys growth outlook and margin trajectory have weakened materially. The brokers action followed a fourth-quarter performance that fell short of expectations and guidance for 2026 that implied a further reduction in profitability. The stock dipped by more than 2% in reaction to the news.
Price target adjustment - The bank also cut its price target for June 2027 to 8.40 from 9.50. That revised target now sits near Signifys closing price on Jan. 30 of 8.15, reflecting the firms reassessment of the companys prospective earnings power after the recent results and subsequent estimate reductions.
Quarterly performance and metrics
J.P. Morgan characterized the fourth quarter as a "material" miss in what is typically a seasonally strong period for Signify. The bank emphasized the importance of the quarter, noting that it usually represents nearly one-third of full-year operating profit. Instead, the quarter fell well short of both the brokers and consensus expectations.
- Signify reported organic revenue decline of 5.2%, versus J.P. Morgans expected 1.6% decline and the consensus forecast of a 2.3% drop.
- Adjusted EBITA was 9 million, missing J.P. Morgan and consensus estimates by 18% and 17%, respectively.
- The adjusted EBITA margin came in at 10%, below J.P. Morgan and consensus expectations of 11.7%, and down from 12.4% a year earlier.
Guidance and broker revisions
Following the earnings release, Signify set guidance for an adjusted EBITA margin of 7.5% to 8.5% in 2026, down from 8.9% in 2025 and 9.9% in 2024. In response, J.P. Morgan lowered its own margin forecast for 2026 to 7.6% from 9.5%, noting that the implied level would be the weakest since 2015, when Signify reported a 7.3% adjusted EBITA margin.
These weaker margin expectations prompted sizeable cuts to earnings and revenue estimates. J.P. Morgan reduced its adjusted earnings per share projection for 2026 by 57% to 1.12 and trimmed its 2027 EPS estimate by 36% to 1.76. Revenue forecasts for 2026 and 2027 were lowered by 4.9% and 7.2%, respectively, with the bank attributing the reductions to both softer organic growth assumptions and foreign exchange headwinds.
Competitive and cost dynamics
J.P. Morgan highlighted intensifying competition from Chinese manufacturers as a central factor weighing on Signifys pricing and margins, particularly after the introduction of U.S. import tariffs. The brokerage said excess supply from China has amplified price erosion across markets, which in turn has limited the ability of cost-saving actions to fully offset margin pressure.
Signify has announced a 80 million cost-reduction program. J.P. Morgan noted, however, that most of the expected benefits are due to be realized in the current year and that those cost savings have not been sufficient to arrest the recent margin decline.
Valuation and shareholder actions
On the basis of the banks revised forecasts, J.P. Morgan said the stock no longer appears undervalued. The firm estimates Signify is trading at about 11.7 times 2026 estimated EV-to-EBITA and roughly 16 times on an adjusted price-to-earnings basis, valuations the analysts described as unattractive given the risk of further earnings deterioration.
Signify kept its dividend intact but suspended its share buyback program after issuing the profit warning. J.P. Morgan indicated the stock now looks fairly valued and suggested that investor focus will likely shift toward the companys portfolio and strategy review, which is scheduled to be presented in June.
Third-party analysis mention
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Outlook
J.P. Morgans downgrade and the accompanying estimate cuts underline the immediate challenges Signify faces in restoring margin strength amid greater pricing pressure and a softer revenue backdrop. The June strategy review will be watched closely by investors looking for evidence that the company can stabilize profitability and navigate competitive headwinds.