Knorr-Bremse ETR: KBX opened 2026 with what CEO Marc Llistosella described as the company’s “best first quarter in the past 5 years,” citing margin recovery in the commercial vehicle business and a record order backlog in its rail division. Management also reiterated its full-year guidance, while noting that geopolitical conditions—particularly the crisis in the Middle East—remain a variable the company is monitoring closely.
Strong Q1 start, with margin improvement across both divisions
Llistosella said the group’s top- and bottom-line results were “broadly in line with our expectations,” supported by solid customer demand and execution. Group order intake declined only slightly year-over-year to “more than EUR 2.2 billion,” while revenues were “mostly EUR 2 billion,” representing 2% organic growth year-over-year, with a stronger contribution from the Commercial Vehicle Systems (CVS) division.
Regional contributions to revenue growth came primarily from APAC and North America, while Europe posted a slight decline, according to Llistosella. Operating EBIT margin improved across both divisions, rising 140 basis points year-over-year to its highest first-quarter level in five years, helped by aftermarket strength, operating leverage, and measures under the company’s BOOST efficiency program.
Free cash flow was EUR 32 million, which Llistosella called “very positive,” supported by cash management and profitability. CFO Frank Weber added that the first quarter is “structurally always the weakest” for free cash flow generation and said the company expects free cash flow to strengthen over the year, peaking in the fourth quarter.
Capital allocation: higher capex, working-capital effects from portfolio moves
Weber said capital expenditure rose moderately year-over-year to EUR 62 million, reflecting investments in maintenance and select growth opportunities. Net working capital ended the quarter at EUR 1.46 billion, influenced by the first-time inclusion of the Duagon acquisition and the removal of the HVAC business, which is classified as “asset held for sale.” He noted working capital days improved by four days.
Weber also highlighted an increase in return on capital employed to 21%, driven mainly by higher EBIT. He attributed the improvement to the company’s “portfolio rotation program” and BOOST measures, while reiterating a commitment to disciplined capital allocation and “selectively into margin accretive growth.”
RVS: record backlog and margin lift; order intake expected stronger in H1 than H2
Rail Vehicle Systems (RVS) order intake reached EUR 1.26 billion, producing a book-to-bill ratio “clearly above 1 at almost 1.2,” Weber said. Order backlog rose 7% to a record “more than EUR 5.9 billion,” which management said provides a foundation for 2026 and beyond. Weber cautioned that rail is “a lumpy project business” and doesn’t fit neatly into quarterly patterns, but added that based on expected tenders, the company anticipates stronger order intake in the first half than the second half.
RVS revenue was EUR 1.06 billion, up 1% organically year-over-year. Aftermarket revenue declined primarily due to FX headwinds and the normalization of pent-up demand in China, though it was “almost flat” organically and represented 53% of revenue. OE revenues increased 6%, raising the OE share to 47% in the quarter.
RVS operating EBIT margin rose 90 basis points to 16.5%, driven by operating leverage and BOOST measures. Weber said he expects revenue and profitability to increase sequentially in the second quarter, and reiterated an expectation that full-year RVS operating margin will be around 17.5%.
In Q&A, Weber addressed analyst questions about a “slow start” in RVS, saying the company has visibility into tenders and sees “some push outs here and there, but nothing spectacular,” describing the pattern as normal tender dynamics and not related to issues at a specific European customer. On guidance sensitivity to the planned HVAC divestment, Weber said the full-year RVS margin could be “slightly above” 17.5% if HVAC is deconsolidated for a significant part of the year, and “slightly below” if it remains in the group, adding that management is comfortable around the midpoint.
CVS: profitability rebound continues; North America weakness offset by resilience
In Commercial Vehicle Systems, order intake was EUR 964 million, with a book-to-bill of 1.1. Weber said Europe drove demand, though comparisons were tough against a strong prior-year quarter. North America orders were affected by FX headwinds, and APAC order intake rose significantly, “mainly driven by China.”
CVS revenue reached EUR 878 million, up 3.6% organically year-over-year. Weber pointed to a notable profitability rebound: operating EBIT rose to EUR 101 million and margin improved 200 basis points to 11.5%. He attributed the improvement to BOOST, operating leverage, a favorable regional mix, and a higher aftermarket share. “CVS is structurally stronger today,” Weber said, noting that the division’s break-even point has been lowered.
Looking ahead, Weber said second-quarter CVS revenues should be flat and profitability “flat to slightly up” sequentially. For the full year, management expects low- to mid-single-digit organic revenue growth and an operating margin “towards 12%.” In response to a question on sensitivity to North American truck production, Weber said achieving a full-year 12% margin implies quarterly margins above 12% later in the year, and he estimated incremental EBIT conversion of “some 20%-25%” on upside volume. Llistosella added that the company reduced CVS break-even from roughly 71%-72% in 2023-2024 to about 65%-66%, and said productivity improvements are visible in results, including reaching EUR 300,000 revenue per employee in the first quarter of 2026.
When asked about North America performance relative to sharply lower truck production, Weber cited a drop in Class 8 production to 54,000 units from 73,000 a year earlier, while Knorr-Bremse’s North American CVS organic revenues declined only 3%. He attributed the resilience to multiple factors including price increases—both aftermarket and OE—tariff charge-throughs, and “good content per vehicle,” while indicating market share was “stable.”
Outlook and key themes: guidance reaffirmed, Middle East monitored, strategy update in July
Llistosella confirmed full-year 2026 guidance, which assumes geopolitical and economic conditions remain “largely stable” and that the Middle East crisis does not escalate or cause prolonged supply-chain disruption. Under those assumptions, management continues to expect:
- Revenue of EUR 8.0 billion to EUR 8.3 billion
- Operating margin of at least 14%
- Free cash flow of EUR 750 million to EUR 850 million
Management said the guidance assumes exchange rates remain broadly stable at February 2026 levels. On the Middle East, Llistosella said direct exposure is limited, with less than 1% of group revenues from the region and “almost no direct supply” from it. Even so, he said both divisions have established task forces to respond quickly to any supply-chain effects.
During Q&A, Llistosella told analysts the company plans to introduce a new program at its July strategy update that will be more growth-oriented, while emphasizing that BOOST “is not over” and is intended to become an “attitude.” He also discussed a shift in China toward a more “offense” posture, including empowering local engineering and increasing agility, and said the company is again being considered for high-speed train projects after years of not being included.
On portfolio topics, Weber said the HVAC divestment process is in final negotiations under exclusivity and that timing reflects ensuring a “fair deal” and the buyer’s financing. On Duagon, he said the business is tracking as expected, with only minor integration costs in the quarter, and reiterated an expectation for Duagon to progress toward a 16% EBIT margin over time, noting seasonality and that the first quarter is typically weakest.
About Knorr-Bremse ETR: KBX
Knorr-Bremse AG, together with its subsidiaries, engages in the development, production, marketing, and servicing of braking and other systems for rail and commercial vehicles worldwide. The company operates in two segments, Rail Vehicle Systems and Commercial Vehicle Systems. The Rail Vehicle Systems segment offers braking systems, entrance and HVAC systems, sanitary systems, coupling systems, digital solutions, smart services for optimizing rail traffic, power electrics, rail computing and communication (RCC)/TCMS, signaling systems, stationary and mobile testing equipment, windshield wiper and wash systems, and extensive aftermarket solutions.
Recommended Stories
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider Knorr-Bremse, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Knorr-Bremse wasn't on the list.
While Knorr-Bremse currently has a Hold rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
MarketBeat's analysts have just released their top five short plays for May 2026. Learn which stocks have the most short interest and how to trade them. Click the link to see which companies made the list.
Get This Free Report
