Goldman Sachs Maintains Buy on Schneider Electric, Ups Target to EUR 316

Overview

After reviewing Schneider Electric's Q1 2026 results, Goldman Sachs reaffirmed its 'Buy' rating and increased its 12-month target price from EUR 302 to EUR 316. Despite Q1 organic sales growth marginally lagging behind Goldman Sachs' projections and the lack of disclosed order data sufficient for comparing data center business momentum, the energy management segment grew at a pace consistent with peer averages and surpassed the company’s annual guidance. Goldman Sachs views Schneider Electric as one of the fastest-growing companies within coverage, benefiting from structural growth in data centers and medium-voltage areas, with valuation presenting an attractive profile relative to its high-growth potential.

Core views

Core View One: Strong Growth Drivers, Guidance Expected to be Revised Upwards. Although Q1 organic sales growth was slightly lower, the performance in the energy management segment remained solid. Using a bottom-up capital expenditure tracker, Goldman Sachs expects Schneider Electric's full-year organic sales growth (OSG) guidance to increase from the current range of 7-10% to 9-12% in H1. For FY2026/FY2027, Goldman Sachs forecasts adjusted EBITA predictions exceeding the Visible Alpha consensus by 2% and 7%, respectively. Core View Two: Significant Structural Advantages, Especially in Data Centers and Liquid Cooling. Schneider Electric holds the largest end-to-end product portfolio among its peers and is the only electrical company with substantial exposure to liquid cooling technology. This positions it as one of the best beneficiaries of structural growth in data centers and medium-voltage segments. Goldman Sachs anticipates its EPS CAGR from 2025 to 2029 will be the highest among covered electrical stocks. Core View Three: Attractive Valuation. Despite optimistic growth prospects, Schneider Electric appears cheaper than its U.S. and European peers when considering PEG ratios. It trades below the EV/IC and ROIC/WACC trend lines for the global electrical industry and offers cash returns to shareholders that exceed the median of its peers. Goldman Sachs maintains its valuation approach using the industry-relative EV/IC and ROIC/WACC framework, believing the stock should command a premium.

Analysis framework

Goldman Sachs employs its proprietary 'Multi-Industry Toolkit' for analysis, incorporating short-term indicators (Barometers), mid-term screens (Screens), and long-term capital expenditure trackers (Capex Tracker). 1. Bottom-Up Capital Expenditure Tracking: By monitoring capital spending trends across core terminal markets, the future growth potential for Schneider Electric is derived, supporting its above-consensus earnings forecasts. 2. Relative Valuation Framework: The use of EV/IC (Enterprise Value/Invested Capital) versus ROIC/WACC (Return on Invested Capital / Weighted Average Cost of Capital) relationship map aids in valuations. This method identifies firms with high return rates but under-reflected valuation due to their capital efficiency. Goldman Sachs argues Schneider Electric should trade above this trendline. 3. Peer Comparison: Organic sales growth, margins, EPS growth rates, and valuation multiples (e.g., PEG, EV/EBIT) of Schneider Electric are compared against direct electrical peers like ABB, Siemens, Legrand, and broader multi-industry companies, highlighting its growth-to-value proposition.

Methodology notes

• Valuation MethodEV/EBITDA valuation

  EV/IC vs. ROIC/WACC Framework

  An integrated valuation approach combining capital efficiency metrics. Typically, the greater the difference between ROIC and WACC, the more value a firm generates, justifying a higher EV/IC multiple. Goldman Sachs utilizes this framework to assess whether Schneider Electric is undervalued.

• Industry/Industrial Analysis FrameworkUpstream-Midstream-Downstream Industry Chain Transmission

  Capital Expenditure Tracker (Capex Tracker)

  By tracking changes in capital spending in downstream terminal markets (such as data centers, buildings, industries), upstream equipment suppliers (like Schneider Electric) can infer prospective order and revenue growth.

• Corporate Fundamentals & Financial FrameworkOthers

  PEG Ratio Screening

  This combines the price-to-earnings ratio (P/E) with the earnings growth rate to evaluate the valuation rationality of high-growth companies. Lower PEG ratios typically imply relatively cheaper valuations concerning their growth speeds.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Schneider Electric (SCHN.PA)

  Beneficiary: Major beneficiary of structural growth in data centers and medium-voltage segments, holding exclusive advantages in liquid cooling technology.

  Strengths

  Comprehensive end-to-end product portfolio; highest projected EPS compound annual growth rate (CAGR) among European electrical peers; stronger cash flow generation than median peer performance.

  Weaknesses

  Q1 organic sales growth slightly below Goldman Sachs' prediction; lacks detailed order data to validate data center momentum.

  Comparison

  Compared to ABB, Siemens, and Legrand, Schneider Electric is cheaper on PEG ratios and has better growth prospects.

  Risks

  Below-key peers’ expected data center growth; slower-than-expected EU building market recovery delaying low-voltage business growth; China dragging down industrial automation business.

Key data

• New Target PriceEUR 316Upgraded from EUR 302
• 2026E EBITA vs Consensus+2%Higher than Visible Alpha consensus forecast
• 2027E EBITA vs Consensus+7%Higher than Visible Alpha consensus forecast
• Expected Full-Year 2026 OSG Guidance9-12%Anticipated increase from current 7-10%
• 2025-2029E EPS CAGRHighest Among Covered PeersLeading in Europe's electrical sector
• Implied Forward EV/EBIT18.5x24-month forward

Impact & implications

The report suggests that Schneider Electric, leveraging its leadership in medium-voltage and data center fields—particularly through exclusive advantages in liquid cooling technology—will continue to outperform its peers in terms of growth. While there may be short-term macro uncertainties, the strength of its fundamentals and recalibrated valuation methodology (rolling to 2027/2028 estimates) support a higher target price. For investors, this stock provides a relatively reasonable entry point given its high-growth context and superior shareholder cash returns compared to peers.

Risks

• Weak data center growth compared to critical peer expectations
• Slow EU building market recovery delaying low-voltage business growth
• China market dragging down industrial automation business
• Acquisition activities diluting ROIC (Return on Invested Capital)
• Short-term weakness in Indian market

What to watch

• Whether OSG guidance is revised upwards to 9-12% as anticipated in H1 2026
• Data center business momentum compared to peers
• Signs of EU building market recovery
• Short-term performance in India