Kepler Cheuvreux has moved Alstom into a "reduce" recommendation from its prior "hold" stance and reduced the 12-month target price to €25, down from €27.50. The brokerage cited persistent execution challenges across the group’s project portfolio and a fragile profit-to-cash conversion profile as the primary reasons for the reassessment. The announcement coincided with a decline in Alstom shares of more than 3% on Tuesday.
The firm trimmed its forecasts for Alstom’s adjusted operating profit (adjusted EBIT) and adjusted earnings per share by between 11% and 18%, saying the changes reflect what it termed the company’s continued economic position. The revised target price is a 9.1% reduction versus the prior target; at the time Kepler published its note Alstom shares were quoted at €26.78, which the broker said implied roughly a 6.6% downside to its new target.
Kepler Cheuvreux highlighted several cash-related and operational indicators behind its downgrade. The broker singled out weak and volatile conversion of reported profits into cash, and noted that despite a record order intake in the third quarter of fiscal 2025-26, Alstom's management did not change its second-half free cash flow guidance. Kepler interpreted that decision as implying lower-than-anticipated pre-payment levels.
Additional pressures flagged by the analysts include the ramp-up of early-stage rolling stock projects, a normalization of contributions from joint ventures, and ongoing capacity underutilization in certain countries. Together, these items were cited as potential factors that could postpone the company’s anticipated margin recovery.
In reassessing Alstom’s financial profile, Kepler Cheuvreux said that reported adjusted EBIT and net income measures overstate the group's underlying economic position. The brokerage amended its own definition of adjusted EBIT to exclude joint ventures and associates, and it adjusted financing charges to account for what it described as an unsustainably low level of coupons being booked to the profit and loss account.
The note also described the rail market environment in which Alstom operates as one with stable volumes but intense competition and demanding customers. Kepler said that complexity inherent in projects limits the benefits that come from industrialization and increases execution risk.
Given these considerations, the brokerage concluded that Alstom shares are trading above the firm’s assessed fair value and no longer present an attractive risk-reward profile under its revised assumptions.