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WEG (WEGZY)
OTHER OTC:WEGZY
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WEG
(OTC:WEGZY)
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Rating:66Neutral
Price Target:
$10.50
▲(23.67% Upside)
Action:DowngradedDate:02/27/26
The score is driven primarily by strong underlying profitability and returns, tempered by a sharp TTM revenue decline, higher leverage versus recent history, and weaker free-cash-flow trends. Technicals are mixed with near-term softness despite longer-term support, while valuation is a headwind due to the high P/E partly offset by a solid dividend yield. Earnings-call commentary supports margins and long-term investment plans but highlights near-term growth and macro risks.
Positive Factors
High profitability & returns
Consistently elevated margins and a ~29% ROE indicate durable operating leverage and pricing power across WEG’s industrial portfolio. High profitability supports internal reinvestment and dividends, helping fund CapEx and M&A without immediate reliance on external financing even during slower revenue periods.
Diversified global deliveries & M&A
Broad geographic delivery strength and targeted acquisitions (e.g., Sanelec) reduce customer and project concentration. Exposure to multiple end markets and long‑cycle equipment shipments smooth cyclical swings and accelerate local market penetration, supporting steadier medium‑term revenue streams.
Shift to solutions, services & capacity build
Strategic pivot toward services, software and energy‑storage plus a sizeable CapEx program supports a structural move to higher‑recurring, higher‑value revenue. Building aftermarket and BESS capabilities should increase customer stickiness and margin resilience over multiple years as installed base monetization grows.
Negative Factors
Revenue weakness / project timing
A sharp TTM revenue decline and a 4Q25 drop reflect missed centralized renewables project deliveries and lumpy long‑cycle order timing. Prolonged project timing gaps can compress absolute EBITDA and limit scale benefits, making sustained top‑line recovery dependent on project cadence and macro stabilization.
Weaker cash conversion & higher leverage
Material decline in free cash flow and a step‑up in debt (D/E ~0.35) reduce balance‑sheet flexibility. With elevated CapEx and M&A plans, weaker cash conversion heightens funding risk and constrains the company's ability to absorb demand shocks or accelerate investments without increasing financial strain.
FX, tariff & renewables delivery risks
Persistent BRL/USD moves, potential U.S./Brazil tariff actions and commodity cost swings (e.g., copper) create ongoing cost and reported‑revenue volatility. Coupled with renewables delivery gaps, these structural headwinds complicate multi‑year forecasting and can suppress reported growth and margins across markets.
WEG (WEGZY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$40.65B
Dividend Yield1.85%
Average Volume (3M)25.10K
Price to Earnings (P/E)35.6
Beta (1Y)0.62
Revenue Growth5.17%
EPS Growth-3.66%
CountryUS
Employees47,529
SectorIndustrials
Sector Strength72
IndustryIndustrial - Machinery
Share Statistics
EPS (TTM)0.07
Shares Outstanding4,197,318,000
10 Day Avg. Volume17,152
30 Day Avg. Volume25,104
Financial Highlights & Ratios
PEG Ratio11.96
Price to Book (P/B)11.93
Price to Sales (P/S)5.19
P/FCF Ratio54.51
Enterprise Value/Market Cap5.12
Enterprise Value/Revenue5.09
Enterprise Value/Gross Profit15.71
Enterprise Value/Ebitda21.20
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
WEG Business Overview & Revenue Model
Company DescriptionWEG S.A. engages in the production and sale of capital goods in Brazil and internationally. The company offers electric motors, generators, and transformers; gear units and geared motors; hydraulic and steam turbines; frequency converters; motor starters and maneuver devices; control and protection of electric circuits for industrial automation; power sockets and switches; and electric traction solutions for heavy vehicles, SUV vehicles, locomotives, and sea transportation capital goods. It also provides solutions for the generation of renewable and distributed energy through hydro, thermal biomass, wind, and solar energy power plants; solutions for various industry; UPSs and alternators for groups of generators; conventional and movable electric substations; industrial electro electronic equipment systems; industrial paint and varnish; and paints for automotive repainting. WEG S.A. was founded in 1961 and is headquartered in Jaragua do Sul, Brazil.
How the Company Makes MoneyWEG generates revenue through the sale of its core products, which include electric motors, variable speed drives, transformers, and automation equipment. The company also earns income from providing maintenance services and technical support for its products. Key revenue streams come from both domestic and international markets, with significant exports contributing to overall sales. WEG has established partnerships with various industries and governments, enhancing its market presence and allowing it to tap into emerging sectors, particularly in renewable energy, which further bolsters its earnings.
WEG Earnings Call Summary
Earnings Call Date:Feb 25, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 29, 2026
Earnings Call Sentiment Neutral
The call presented a balanced picture: operational and strategic positives (margin expansion, strong external-market deliveries, sizeable 2026 CapEx program, strategic acquisitions and growing services orientation) were offset by near-term revenue pressures (operating revenue down 5.3% YoY), absolute EBITDA decline, exchange-rate headwinds, and tariff/geopolitical uncertainties. Management emphasized ongoing investments and a healthy margin profile but acknowledged that absence of prior renewables project deliveries and currency/tariff volatility may constrain growth in the near term, with larger capacity benefits likely materializing in late 2027 and beyond.Q4-2025 Updates
Positive Updates
EBITDA Margin Expansion
EBITDA margin increased to 22.4% in 4Q25 (up vs 4Q24) despite revenue pressures; EBITDA reached BRL 2.3 billion (a 4% decrease YoY) but margin improvement was credited to a better product mix and tariff-mitigation actions.
Resilient External Market Deliveries
Strong deliveries in power generation, transmission & distribution (notably in North America) and robust long-cycle equipment shipments (especially high-voltage motors). Commercial & appliance motors showed sales growth in China and North America; coatings & varnishes revenue grew driven by Mexico and the Heresite U.S. site acquisition.
Robust Investment and CapEx Program
Investments during the quarter totaled BRL 814 million (50% Brazil / 50% abroad). Management approved a substantial CapEx plan for 2026 of BRL 3.6 billion (disclosed split ~46% domestic / 54% abroad) to support capacity expansion and growth.
Strategic M&A and Manufacturing Expansion
Acquisition of Sanelec (India) to strengthen power generation control offerings and international footprint; integration of Heresite site in U.S. for coatings; announced construction of a dedicated battery energy storage systems (BESS) plant in Itajaí targeting completion in H2 2027.
High Financial Returns Maintained
Management reported 'main financial indicators' at a high level of 32.5% and a healthy ROIC, reflecting continued strong operating profitability even after an increase in invested capital from recent investments and acquisitions.
Growing Solutions & Services Positioning
Company is expanding from product sales toward solutions and services (including large-machine services, maintenance contracts, software/monitoring and electric mobility services), indicating a strategic shift to higher recurring and value-added revenue streams.
Negative Updates
Operating Revenue Decline
Operating revenue decreased by 5.3% in 4Q25 compared to 4Q24, primarily driven by the absence of centralized wind and solar generation project deliveries that had been concentrated in the prior-year period.
Absolute EBITDA Reduction
Although margins expanded, absolute EBITDA fell 4% YoY to BRL 2.3 billion, reflecting the top-line decline and the lumpy nature of long-cycle project deliveries.
Exchange Rate Headwinds
Revenue in Brazilian reais was negatively affected by exchange-rate fluctuations; management noted BRL appreciation (from about BRL 5.84 in 1Q25 to below BRL 5.20) makes achieving double-digit reported revenue growth more difficult and may weigh on growth particularly in H1.
Tariff and Geopolitical Uncertainty
Uncertainty around U.S. tariffs and Brazil's trade measures (section 232-like dynamics on metals) creates potential cost and timing volatility; exact impacts and duration remain unclear and may affect imported-input costs in coming quarters.
Renewables Project Delivery Gap
A meaningful portion of the revenue decline stemmed from lower wind and solar project deliveries versus the comparable quarter, reducing near-term generation-related sales and affecting GTD performance.
Transformer Capacity Ramp Timing
While management is investing to roughly double T&D/transformer capacity (multiple sites internationally), material commercial contribution is expected more materially toward late 2027 and beyond due to ramp-up and workforce training (noted ~2 years to train transformer technicians).
Volatility in Industrial Orders and Demand
Industrial demand showed quarter-to-quarter volatility (impacted by interest rates, investment cycles and geopolitical/tariff uncertainty), introducing near-term unpredictability for order intake and revenues in certain segments.
Company Guidance
Guidance: WEG expects continued “strong revenue opportunities” but cautions that exchange‑rate headwinds and the absence of centralized solar projects may weigh on growth—particularly in H1—while maintaining a focus on operational efficiency to support solid margins and returns (ROIC quoted ~32.5%). Key metrics cited: 4Q25 revenue -5.3% y/y, EBITDA BRL 2.3 billion (-4% y/y) with a 22.4% EBITDA margin, investments in the quarter BRL 814 million (50% Brazil / 50% abroad), and a robust CapEx plan for 2026 of BRL 3.6 billion (46% domestic / 54% international). Management reiterated M&A and capacity actions (Sanelec acquisition Dec‑25; new BESS plant in Itajaí due H2‑2027), said they will pursue double‑digit revenue growth if exchange rates stabilize (current BRL/USD ~5.14–5.20 vs Q1‑25 ~5.84) but warned growth could be single‑digit otherwise, and flagged tariff and commodity (e.g., copper) risks and a gradual transformer capacity ramp with more material contribution after 2027–28.WEG Financial Statement Overview
Summary
Profitability remains strong (TTM gross margin ~32%, operating margin ~22%, net margin ~16%) with attractive returns (TTM ROE ~29%). Offsetting this, TTM revenue shows a sharp decline versus the prior period, leverage has stepped up (debt-to-equity ~0.35 with higher debt and lower equity vs 2024), and free cash flow/cash conversion weakened materially versus 2023–2024.Income Statement
Profitability is strong and consistent, with TTM (Trailing-Twelve-Months) gross margin at ~32% and net margin at ~16%, broadly in line with 2023–2024 levels. Earnings power looks solid as operating profitability remains high (TTM operating margin ~22%). The main concern is growth momentum: after healthy revenue growth in 2021–2024, TTM (Trailing-Twelve-Months) revenue shows a sharp decline versus the prior period, signaling a potential demand slowdown or tough comps that could pressure near-term earnings despite resilient margins.78
Positive
Balance Sheet
Leverage remains reasonable overall, with TTM (Trailing-Twelve-Months) debt-to-equity at ~0.35 (still not excessive for an industrial), and the company continues to generate strong returns on shareholder capital (TTM return on equity ~29%). The key weakness is a noticeable step-up in debt and a meaningful drop in equity in TTM (Trailing-Twelve-Months) versus 2024, which reduces balance-sheet flexibility and raises the importance of sustained cash generation to support the higher leverage profile.72
Positive
Cash Flow
Cash generation is positive with TTM (Trailing-Twelve-Months) operating cash flow of ~6.5B and free cash flow of ~3.8B, and free cash flow equals ~59% of net income—healthy but down from 2023–2024. However, TTM (Trailing-Twelve-Months) free cash flow declined materially and cash conversion weakened versus prior years, suggesting higher working-capital needs and/or elevated investment spending. Overall cash flow quality is adequate, but the recent downshift is the main risk to monitor.63
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 40.00B | 37.99B | 32.50B | 29.90B | 23.56B |
| Gross Profit | 12.50B | 12.81B | 10.80B | 8.70B | 6.96B |
| EBITDA | 8.70B | 8.89B | 7.37B | 5.76B | 4.90B |
| Net Income | 6.25B | 6.04B | 5.73B | 4.21B | 3.59B |
Balance Sheet | |||||
| Total Assets | 42.62B | 41.49B | 31.50B | 28.13B | 23.93B |
| Cash, Cash Equivalents and Short-Term Investments | 7.28B | 8.00B | 7.08B | 4.98B | 3.22B |
| Total Debt | 6.06B | 4.42B | 3.39B | 4.01B | 2.11B |
| Total Liabilities | 24.08B | 18.36B | 13.64B | 12.89B | 9.92B |
| Stockholders Equity | 17.41B | 22.20B | 17.34B | 14.83B | 13.60B |
Cash Flow | |||||
| Free Cash Flow | 3.81B | 5.40B | 5.36B | 1.81B | 92.04M |
| Operating Cash Flow | 6.32B | 7.25B | 7.02B | 2.98B | 939.38M |
| Investing Cash Flow | -2.85B | -4.09B | -1.71B | -1.35B | -683.87M |
| Financing Cash Flow | -4.28B | -2.76B | -2.96B | 191.91M | -1.44B |
WEG Technical Analysis
Positive
8.49
Price Trends
9.38
Positive
8.57
Positive
7.77
Positive
Market Momentum
0.11
Positive
47.87
Neutral
4.89
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WEGZY, the sentiment is Positive. The current price of 8.49 is below the 20-day moving average (MA) of 10.04, below the 50-day MA of 9.38, and above the 200-day MA of 7.77, indicating a neutral trend. The MACD of 0.11 indicates Positive momentum. The RSI at 47.87 is Neutral, neither overbought nor oversold. The STOCH value of 4.89 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for WEGZY.
WEG Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $30.41B | 28.40 | 15.29% | 1.04% | -5.24% | 45.69% | |
70 Outperform | $36.87B | 64.93 | 5.35% | 0.10% | 4.20% | -34.47% | |
68 Neutral | $16.19B | 25.11 | 17.48% | 0.96% | 0.83% | -1.32% | |
68 Neutral | $45.78B | 46.62 | 27.71% | 1.33% | 0.98% | -7.51% | |
66 Neutral | $40.65B | 35.63 | 29.08% | 1.85% | 5.17% | -3.66% | |
64 Neutral | $35.98B | 26.41 | ― | 1.88% | 0.73% | -15.57% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% |
* Industrials Sector Average
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.