Source: Inderes & Bloomberg  (consensus includes 16 estimates)

Hexagon reported its Q4 financial report on Friday morning, which was mainly in line with our and consensus estimates. Revenue and profitability were materially burdened by FX changes, especially a weakened USD/EUR. Organic growth was just slightly lower than expected due to, for example, destocking in China’s heavy infrastructure segment. The company plans to spin off Octave, a collection of enterprise software businesses, to an independent US-listed entity during H1/2026. The remaining Hexagon Core will focus on robotics, sensors, and related software. We terminate coverage of Hexagon. Our most recent recommendation for the stock was Reduce with a 110 SEK target price.

Q4’s weakness was not a surprise

Hexagon’s Q4 performance was broadly as expected, with adjusted EBIT in line with our estimate and slightly above consensus. Organic revenue growth was 3%, a tad lower compared to our estimate of 4% but in line with consensus. Total revenue growth was, however, negative (-1%) due to a -6% FX impact. Organic growth was weak in China and other parts of Asia but strong in North America. Manufacturing Intelligence and Geosystems’ growth disappointed, burdened by weakness in the automotive and infrastructure sectors. Autonomous Solutions exceeded expectations with support from the aerospace, defense, and mining segments. Adjusted EBIT-% declined to 29.4% (Q4’24: 31.1%), mainly driven by FX. Cash conversion was strong at 121%, and net debt was at a healthy level of 1.7x adjusted EBITDA at the end of 2025. The dividend proposal of 0.14 EUR per share exceeded our and consensus expectation of 0.13 EUR.

Some recovery in growth and profitability likely in 2026

We made minor estimate changes, with revenue and EBIT for 2026–27e reduced by 2% due to unfavorable FX movements and slightly weaker Geosystems growth, reflecting destocking in China due to the weak heavy infrastructure market. Organic growth is expected to improve to 4% in 2026 from 2% in 2025, supported by Manufacturing Intelligence, Geosystems, and Octave as comparisons ease and cyclical demand improves, while Autonomous Solutions growth is forecast to slow from high levels due to tougher comparables. Profitability is expected to recover after a weak 2025, driven by a cost-saving program, volume growth, and a more favorable sales mix from new margin-accretive products. Q1 remains weak due to Geosystems destocking and FX headwinds, with currency impacts easing from Q2 onward.

Company about to split into two separate listed entities

Hexagon is undergoing a great transformation given the planned split-up of the group into two more focused players, Hexagon Core and Octave. Hexagon Core focuses on robotics and sensors, while Octave is a pure-play software business. The rationale for the move is to allow better strategic focus for both companies that could potentially enhance future growth and value-creation opportunities. Currently, Hexagon is a combination of roughly 200 acquisitions made since the late 1990s, which makes the current structure rather complex and diverse. The company has also initiated a cost-saving program with 110 MEUR potential savings kicking in gradually from Q4’25 and to be fully in place by the end of 2026.