Key Takeaways:
- Q2 revenue rose 6% to €2.1 billion, with operating margin at 14.2%
- Knorr-Bremse raised 2026 guidance to as much as €8.3 billion in revenue
- New "Growth Beyond" strategy targets €10 billion in revenue by 2030
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Knorr-Bremse raises 2026 guidance after Q2 margin hits 5-year high
Knorr-Bremse AG reported Q2 revenue of €2.1 billion, with operating margin rising 110 basis points to 14.2%, its highest in five and a half years.
"The quarter was very strong, with both rail and commercial vehicle divisions contributing," Chief Executive Officer Marc Llistosella said.
Rail Vehicle Systems revenue increased 7% to €1.18 billion, with original-equipment sales jumping 24% to €557 million. Commercial Vehicle Systems posted €959 million in revenue, including 8% organic growth, as operating margin improved 150 basis points to 11.8%.
The company raised its full-year 2026 guidance, now targeting revenue of €8.1 billion to €8.3 billion and operating profit of €1.4 billion to €1.45 billion. Free cash flow is expected to reach €750 million to €850 million, with management anticipating the upper end.
Rail growth drives margin expansion
Rail Vehicle Systems operating margin reached 17.5%, supported by operating leverage and efficiency measures from the BOOST transformation program. Aftermarket revenue of €628 million represented 53% of division revenue. The order backlog grew 6% to more than €5.9 billion, near a record level, Chief Financial Officer Frank Weber said, noting that quarterly ordering patterns in rail can be uneven.
Commercial Vehicle Systems operating profit rose to €114 million. Weber said both businesses grew in every region, including China, while North American revenue rose 6% despite challenging truck production levels. The company attributed the improvement to transformation measures, operational discipline and a lower cost base.
Guidance raised as cash flow strengthens
Second-quarter free cash flow reached €262 million, bringing first-half free cash flow to €294 million. Return on capital employed rose 250 basis points year over year to 23.8%. Net working capital included a roughly €20 million positive one-time effect from reimbursement of previously paid US tariffs.
The company signed an agreement to sell its HVAC business, completing the divestment program announced under BOOST. Knorr-Bremse has sold five companies with combined annual revenue of approximately €750 million. Headcount declined from 33,000 to 30,500 including HVAC, or 29,200 excluding it.
Growth Beyond strategy targets €10 billion by 2030
Under its new "Growth Beyond" strategy, Knorr-Bremse targets approximately €10 billion in organic revenue and a 16% operating EBIT margin by 2030, with cash conversion above 90% and return on capital employed above 25%. The plan prioritizes margin-accretive organic growth, selective acquisitions and cost efficiency, with artificial intelligence as an operational enabler.
Rail Vehicle Systems is targeted to deliver average annual revenue growth of more than 7% through 2030 and an operating margin of about 20%. Commercial Vehicle Systems has margin potential of roughly 12% to 14%, depending on market conditions. Energy technology is a focus area, with the company aiming to double revenue from its combined Microelettrica and Zelisko business to about €500 million by 2030.
Weber said the company has theoretical acquisition capacity of about €5 billion while maintaining an investment-grade credit profile, though he added that Knorr-Bremse has no current plan requiring that level of funding.
The guidance raise signals management expects continued demand across both rail and truck markets. Investors will watch third-quarter results for further margin progression in the Commercial Vehicle Systems division.
This article is for informational purposes only and does not constitute investment advice.
