Wärtsilä Q3'25 preview: Towards the year-end with strained valuation

Translation: Original published in Finnish on 10/21/2025 at 7:47 pm EEST.

Wärtsilä will report its Q3 interim results on Tuesday October 28, at 8.30 am EET. Compared to the strong trend of previous quarters, we estimate more moderate order growth. On the other hand, a robust order book supports revenue and earnings growth. Although we have made minor revisions to our estimates, we still consider the share's valuation challenging. We reiterate our Reduce recommendation and raise our target price to EUR 22 (previously EUR 21).

No significant changes in the demand outlook

Based on Wärtsilä's management investor calls in Q3, we believe the outlook for market development has remained largely unchanged since the Q2 report. The outlook for Marine is moderately bullish. This is also supported by the US decision in early October to order 11 icebreakers, which could generate significant business for Wärtsilä in the coming years. Conversely, the IMO's recent decision to delay the adoption of a maritime emissions incentive system for one year could slightly slow down short-term investments in new, cleaner technologies, in which Wärtsilä has a strong market position. While Energy's market activity has remained strong, Wärtsilä has tempered expectations for continued order growth, as the company's order book for the last 12 months had reached a very high level at the end of June. Meanwhile, the market outlook for Energy Storage, which has a minor impact on earnings, has weakened further due to the trade war between the US and China, which has halted the US energy storage market and increased competition elsewhere in the world.

We expect a small increase in revenue and orders in Q3

We expect Wärtsilä's orders for Q3 to total 1,856 MEUR, which is a 3% increase year-on-year (consensus: 4%). We predict that revenue will grow to 1,792 MEUR (+4%, consensus 3%). In our estimates, Energy is driving growth in both orders and revenue. Our order estimates for Energy Storage also assume high growth relative to the low level of the comparison period, but this can fluctuate significantly between quarters and is difficult to predict. We expect negative growth and declining results for the Portfolio Business unit following the divestment of the ANCS unit.

Energy's result improves, ANCS sales affect Portfolio Business unit

We anticipate comparable EBIT to have improved in Q3 to 190 MEUR (consensus: 194 MEUR) from 177 MEUR in the comparison period. This is supported by growth in the profitable Energy and Marine units, as well as a moderate upturn in Energy margins due to strong market activity. On the other hand, we expect the margin in Marine to weaken as growth focuses on new equipment sales. According to our estimates, selling the profitable ANCS has significantly weakened Portfolio Business's earnings level. We expect reported EBIT to increase to 216 MEUR, supported by a one-time positive earnings impact of 30 MEUR to be recorded in Q3 from the sale of ANCS.

Valuation has become strained

We made some changes to our estimates in connection with the preview update. In the short term, these changes were negative (EBIT for 2026 decreased by 3%) because we revised our estimates of the negative impact of the ANCS divestment on Portfolio Business's operating result. Additionally, we lowered Energy Storage's earnings forecasts due to the weak market. On the other hand, we slightly raised our long-term growth outlook forecasts for Marine in light of recent icebreaker deals. We see the valuation as challenging in the short term (EV/EBIT 2025-26e: 17.6x and 15.6x). Wärtsilä's result will benefit from the positive underlying momentum generated by the growth in profitable service sales. In terms of new equipment sales, there are uncertainties regarding the continuation of the data center boom and investment activity in renewable energy, although the company's outlook in these areas remains positive for the time being.