Hexagon’s cyclical headwinds continued in Q3, but the improved revenue mix contributed to gross margin growth. A plan to potentially spin off certain fast-growing, highly profitable, software-focused parts of the group was announced

Cyclical headwinds continued in Q3, and a material recovery might not yet take place in Q4. We estimate growth to rebound in 2025-26 as the relatively low comparison figures and lower interest-rates increasingly supporting industrial activity.

Hexagon released its Q3 earnings report today, which was somewhat weaker than we or the consensus expected. In addition, the company announced that it is evaluating the potential separation of its Asset Lifecycle Intelligence business, which is primarily software with a high proportion of recurring revenue.

How do you find good buying opportunities in growing quality companies such as Vaisala and Hexagon, which almost always look expensive relative to their near-term performance? We believe these companies should be bought when the market fears the short-term effects of a weak demand cycle - in other words, a dip.

Hexagon suffered from cyclical headwinds in Q2 but also demonstrated strong underlying development with good growth in recurring revenue and improved efficiency. Analyst Pauli Lohi comments on this development and the company’s outlook.

Q2 performance suffered from cyclical headwinds, but Hexagon also demonstrated strong underlying development such as good growth in recurring software revenue and improved efficiency. A cyclical recovery is not yet in sight in the near term, but we expect the underlying positive development to be increasingly reflected in earnings in Q4 and 2025.