AB Volvo (publ) (VOLV-B.ST) | Investment Case

1. Company Snapshot

1.a. Company Description

AB Volvo (publ), together with its subsidiaries, manufactures and sells trucks, buses, construction equipment, and marine and industrial engines in Europe, North America, South America, Asia, Africa, and Oceania.The company offers trucks for long-haulage, construction, mining, and distribution purposes under the Volvo, UD Trucks, Renault Trucks, Mack, Eicher, Arquus, cellcentric, and Dongfeng Trucks brands; and city and intercity buses, coaches, and bus chassis, as well as associated transport systems under the Prevost and Nova Bus brands.It also provides construction equipment, including excavators, articulated and rigid haulers, wheel loaders, road construction machines, pavers, and compactors under the brand names of Volvo, and SDLG Trucks.

In addition, the company offers engines and power solutions for leisure and commercial vessels, as well as for power generation, industrial, and off-road applications under the Volvo Penta brand name.Further, it provides financing, insurance, rental, spare parts, repair, preventive maintenance, service agreement, and assistance services.The company offers its products and services through a network of dealerships and workshops.

It has a strategic alliance with Isuzu Motors within commercial vehicles; a partnership with Samsung SDI Co to develop battery packs for its trucks; and an agreement with NVIDIA and Aurora to develop autonomous trucks.AB Volvo (publ) was incorporated in 1915 and is headquartered in Gothenburg, Sweden.

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1.b. Last Insights on VOLV

The recent 3-month performance of AB Volvo (publ) was driven by several positive factors. The company's net sales, although declining by 5% adjusted for currency movements, remained robust at SEK 122.9 billion. Sales of vehicles were 6% lower than in Q2 2024, but the underlying service development remained robust, supported by continued good utilization of vehicles and machines. The service sales growth was a notable highlight, with the company's focus on US-built SUVs as tariffs eat into its sedan business from China and the EU. Additionally, Volvo Group's engine plant in Skövde, Sweden, received up to €49 million from the EU Innovation Fund to support the CarbonSmart Factory project: SPACE, advancing the company's transformation through net-zero innovation and clean technology. Furthermore, Volvo CE is divesting its SDLG stake to Lingong Group fund, which is forecast to positively impact Volvo CE's operating income by Skr1bn at closing. The company is also investing $261 million to bolster key production sites, including expanding US construction equipment production, to mitigate supply chain risks.

1.c. Company Highlights

Last Price	296.6
Change Percentage	2.81%
Open	293.8
Previous Close	288.5
Market Cap ( Millions)	602987
Volume	3381412
Year High	344.4
Year Low	220.8
M A 50	268.35
M A 200	274.66

FCF Yield	2.91%
Dividend Yield	6.23%
ROE	19.61%
Debt / Equity	146.05%
Net Debt / EBIDTA	258.76%
Price To Book	3.51
Price Earnings Ratio	16.96
Price To FCF	34.37
Price To sales	1.22
EV / EBITDA	10.64

2. Volvo Group's Q2 2025 Earnings: Navigating Challenges with Strategic Resilience

Volvo Group reported its Q2 2025 earnings with net sales of SEK 123 billion, reflecting a 12% year-over-year decline, or 5% when adjusted for currency fluctuations. The adjusted operating income stood at SEK 13.5 billion, yielding an 11% operating margin. Earnings per share (EPS) were SEK 3.64, below the consensus estimate of SEK 5.06, highlighting a significant shortfall. However, the company maintained a robust financial position with an operating cash flow of SEK 2.9 billion and a net cash position of SEK 43.1 billion in industrial operations, underscoring strong liquidity. The return on capital employed (ROCE) was 25.7% on a rolling 12-month basis, though it showed a declining trend.

Publication Date: Jul -19

                                    📋 Highlights
                                    Net Sales Performance::
                                                Net sales dropped 12% year-over-year to SEK 123 billion, with a 5% decline when adjusted for currency.
Operating Margin::
                                                Adjusted operating income reached SEK 13.5 billion, resulting in an operating margin of 11%.
Electric Vehicle Growth::
                                                Orders for fully electric vehicles increased by 59%, with deliveries up by 26%.
Regional Market Contrast::
                                                Europe saw stable truck deliveries, while North America experienced a 16% decline in truck deliveries.
Strategic Moves::
                                                Volvo Group divested its stake in SDLG in China and acquired a European dealer to strengthen its Construction Equipment segment.

                                

Segment Performance and Operational Highlights

Truck deliveries dropped by 10% globally, with stability in European heavy-duty truck deliveries offset by declines in North and South America. The Construction Equipment segment showed resilience with an 11% increase in deliveries, while the Service business grew 2% on a currency-adjusted basis, excluding the Arquus divestment. Volvo's strategic shift towards electrification is gaining traction, with electric vehicle orders rising by 59% and deliveries up 26% year-over-year.

Strategic Initiatives and Market Outlook

Volvo received EUR 49 million from the EU Innovation Fund for its CarbonSmart Factory project, supporting its decarbonization efforts. The company has exited the mass market in China, focusing on premium segments, and is leveraging its JV with Dongfeng to emphasize total cost of ownership (TCO) and lifecycle solutions. Management noted ongoing tariff impacts, particularly in North America, where pricing dynamics have become challenging. Despite this, Volvo aims to maintain pricing discipline and offset tariff effects through strategic adjustments.

Valuation and Investor Perspective

Volvo's valuation metrics indicate a reasonable price relative to its financial performance. The stock trades at a P/E ratio of 11.42 and a P/B ratio of 2.69, with a dividend yield of 4.05% and a free cash flow yield of 4.47%. The ROIC and ROE are 9.04% and 24.91%, respectively, with a net debt-to-EBITDA ratio of 1.88, reflecting moderate leverage. While the company faces near-term headwinds, particularly in North America, its strategic focus on electrification, operational efficiency, and disciplined capital allocation positions it well for long-term growth.

3. NewsRoom

Does Volvo’s Recent Electric Vehicle Investment Signal a Value Opportunity in 2025?

Nov -09

Source:

STRT or VLVLY: Which Is the Better Value Stock Right Now?

Nov -05

Source:

Uber Is Crushing Lyft—And It’s Not Even Close

Nov -04

Source:

New Strong Sell Stocks for Oct. 23

Oct -23

Source: zacks.com

Does Recent Supply Chain News Signal a New Opportunity for Volvo in 2025?

Sep -24

Source:

How Volvo plans to navigate tariffs with a new product focus

Jul -17

Source:

Volvo Group - the second quarter 2025

Jul -17

Source:

Nvidia Hits $4 Trillion Market Cap: Buy, Hold, or Take Profits in NVDA?

Jul -09

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.60%)

6. Segments

Industrial Operations - Trucks

Expected Growth: 5.4%

Growing construction activities, increasing demand for fuel-efficient vehicles, and rising government investments in infrastructure development are expected to drive the growth of AB Volvo's heavy-duty trucks, construction equipment, and buses under Volvo, Mack, and Renault brands.

Industrial Operations - Construction Equipment

Expected Growth: 5.3%

Increasing infrastructure investments, urbanization, and demand for energy-efficient equipment fuel the growth of AB Volvo's construction equipment segment, driving growth in excavators, wheel loaders, and asphalt pavers.

Financial Services

Expected Growth: 8.5%

Increasing demand for financing solutions, growth in emerging markets, and Volvo's strong brand reputation drive segment growth.

Industrial Operations - Buses

Expected Growth: 6.3%

Volvo's bus and chassis segment is driven by increasing demand for sustainable transportation, growing urbanization, and government initiatives promoting eco-friendly public transport, leading to a forecasted growth rate.

Industrial Operations - Group Functions and Other

Expected Growth: 4.5%

Volvo Group's diversified operations drive growth, supported by increasing demand for sustainable transport solutions and growing aftermarket services.

Industrial Operations - Volvo Penta

Expected Growth: 5.5%

Demand for eco-friendly and fuel-efficient engines drives growth in marine applications, while industrial applications benefit from increasing investments in infrastructure and manufacturing capacity.

Eliminations

Expected Growth: 4.2%

AB Volvo’s growth is expected to be driven by demand for sustainable transportation solutions, investments in electromobility, and increasing adoption of automation and digitalization technologies, leading to improved profitability and enhanced competitiveness.

Reclassifications and Eliminations

Expected Growth: 2.5%

Reclassifications and Eliminations, driven by adjustments for discontinued operations and other non-organic changes, are expected to grow at a CAGR of 2.5%. AB Volvo’s strategic initiatives will support this expansion.

7. Detailed Products

Trucks

Volvo Trucks provides a range of commercial vehicles, including heavy-duty trucks, medium-duty trucks, and light-duty trucks, designed for various applications such as long-haul transportation, construction, and distribution.

Buses

Volvo Buses offers a range of city buses, coach buses, and tourist buses, designed for public transportation, commuter services, and tourism.

Construction Equipment

Volvo Construction Equipment provides a range of heavy machinery, including excavators, wheel loaders, and articulated haulers, designed for construction, mining, and quarrying applications.

Marine Engines

Volvo Penta provides a range of marine engines and propulsion systems, designed for leisure boats, commercial vessels, and industrial applications.

Industrial Engines

Volvo Penta provides a range of industrial engines, designed for power generation, pumping, and compressor applications.

Financial Services

Volvo Financial Services provides financial solutions, including financing, leasing, and insurance, designed for customers and dealers.

8. AB Volvo (publ)'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for AB Volvo (publ) is medium due to the presence of alternative modes of transportation and logistics services. However, the company's strong brand reputation and diversified product offerings mitigate this threat to some extent.

Bargaining Power Of Customers

The bargaining power of customers for AB Volvo (publ) is low due to the company's strong market position and the lack of significant buyer concentration in the industry.

Bargaining Power Of Suppliers

The bargaining power of suppliers for AB Volvo (publ) is medium due to the presence of a few large suppliers in the industry. However, the company's strong relationships with its suppliers and its diversified supply chain mitigate this threat to some extent.

Threat Of New Entrants

The threat of new entrants for AB Volvo (publ) is low due to the high barriers to entry in the industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry for AB Volvo (publ) is high due to the presence of several established competitors in the industry, including Daimler, Volkswagen, and Scania. The company's strong market position and diversified product offerings help to mitigate this threat to some extent.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	57.18%
Debt Cost	3.95%
Equity Weight	42.82%
Equity Cost	9.24%
WACC	6.21%
Leverage	133.54%

11. Quality Control: AB Volvo (publ) passed 3 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Vinci

A-Score: 6.6/10

Value: 6.3

Growth: 6.2

Quality: 4.6

Yield: 6.9

Momentum: 6.0

Volatility: 9.3

1-Year Total Return ->

Volvo

A-Score: 6.1/10

Value: 4.7

Growth: 6.4

Quality: 4.4

Yield: 9.4

Momentum: 5.0

Volatility: 6.7

1-Year Total Return ->

PACCAR

A-Score: 6.0/10

Value: 3.7

Growth: 6.7

Quality: 6.1

Yield: 8.0

Momentum: 3.0

Volatility: 8.3

1-Year Total Return ->

BAE Systems

A-Score: 5.7/10

Value: 2.4

Growth: 6.9

Quality: 4.8

Yield: 4.4

Momentum: 9.5

Volatility: 6.3

1-Year Total Return ->

Daimler Truck

A-Score: 5.0/10

Value: 6.2

Growth: 4.8

Quality: 3.1

Yield: 6.9

Momentum: 4.0

Volatility: 5.0

1-Year Total Return ->

Epiroc

A-Score: 4.6/10

Value: 1.8

Growth: 6.2

Quality: 7.0

Yield: 3.1

Momentum: 4.0

Volatility: 5.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

5.05%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

6.21%

AB Volvo (publ) - SE0000115446

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on VOLV

1.c. Company Highlights

Less Volatile

Higher Yield

Strong Momentum

Earnings Beats

Revenues Beats

Stable Momentum

Average Growth

Average Yield

Medium Volatility

Fairly Valued

Earnings Miss

Revenues Miss

2. Volvo Group's Q2 2025 Earnings: Navigating Challenges with Strategic Resilience

Segment Performance and Operational Highlights

Strategic Initiatives and Market Outlook

Valuation and Investor Perspective

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.60%)

6. Segments

Industrial Operations - Trucks

Expected Growth: 5.4%

Industrial Operations - Construction Equipment

Expected Growth: 5.3%

Financial Services

Expected Growth: 8.5%

Industrial Operations - Buses

Expected Growth: 6.3%

Industrial Operations - Group Functions and Other

Expected Growth: 4.5%

Industrial Operations - Volvo Penta

Expected Growth: 5.5%

Eliminations

Expected Growth: 4.2%

Reclassifications and Eliminations

Expected Growth: 2.5%

7. Detailed Products

Trucks

Buses

Construction Equipment

Marine Engines

Industrial Engines

Financial Services

8. AB Volvo (publ)'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: AB Volvo (publ) passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

12.e Scoring ^Insights

12.f DCF ^BETA