Knorr-Bremse AG

Knorr-Bremse reported Q2 2026 group revenue of EUR 2.1 billion, organic growth of more than 6% year over year, and operating EBIT margin of 14.2%, up 110 basis points year over year. Free cash flow was EUR 262 million in Q2 and EUR 294 million in the first half; CapEx was EUR 70 million, or 3.3% of revenue; net working capital was EUR 1.43 billion; and ROCE rose to 23.8%, up 250 basis points year over year. By segment, Rail Vehicle Systems revenue increased 7% to EUR 1.18 billion with EBIT margin of 17.5%, and CVS revenue rose to EUR 959 million with EBIT margin of 11.8%. For 2026, management raised guidance to revenues of EUR 8.1 billion to EUR 8.3 billion, operating EBIT margin of 14% to 14.5%, and free cash flow of EUR 750 million to EUR 850 million, with the upper end expected; RVS full-year margin should be around 17.5%, and CVS full-year organic revenue growth should be low to mid-single digit with EBIT margin around 12%.

Marc Llistosella said the quarter was "very strong," driven by both Rail and Truck, and emphasized that the improved results reflect not just supportive markets but structural improvements from BOOST. He highlighted the signed HVAC divestment, said the sellout program is now complete with roughly EUR 750 million of sold company revenue, and presented Growth Beyond as the next phase focused on margin-accretive growth, smarter capital allocation, and a broader portfolio strategy. His tone was confident and forward-looking, repeatedly framing the 2030 goals as grounded in execution rather than hope.

Frank Weber focused on execution, cash, and margin discipline. He cited CapEx of EUR 70 million, or 3.3% of revenues, net working capital of EUR 1.43 billion, 63 days of working capital, free cash flow of EUR 262 million in Q2 and EUR 294 million in H1, and ROCE of 23.8%; he also noted a roughly EUR 20 million positive one-off from U.S. tariff reimbursements. On strategy, he said the balance sheet supports disciplined M&A while maintaining investment-grade credit, described roughly EUR 5 billion of theoretical acquisition firepower, and reiterated capital allocation priorities: organic growth and dividends first, then M&A, then buybacks/special dividends.

Analysts pressed on why CVS guidance remains conservative versus the strong Q3 run-rate, whether CVS still needs to exist as a separate capital allocation priority, and how much headroom Knorr-Bremse really has for M&A. Management said North American truck assumptions remain cautious at around 260,000 Class 8 units because recent market data have been weak, and that the company will benefit from operating leverage if the market improves. They also argued CVS remains strategically important because of synergies with Rail and said M&A will stay disciplined, value-accretive, and within investment-grade limits; on portfolio optimization, management said there are still some underperforming pockets to benchmark upward. Questions on Rail order lumpiness and China were met with reassurance that the Q2 order decline was normal project timing, not a major pushout, and that China rail could improve further over time, including in high-speed and freight.