Skanska Poised for a Rebound

Emily Carter

Welcome back, everyone, to another episode of Global Equity Research—this is Emily Carter with you, and as always, I’m joined by David Mitchell.

David Mitchell

Glad to be here, Emily. Today, we’re diving into Skanska—the Swedish construction giant—with a full institutional-grade analysis, just like you’ve come to expect from Softgate Capital Research. If you want the accompanying report or the numbers we’ll be referencing, you can find that at research.softgatecapital.com or in the episode description.

Emily Carter

You know, for listeners who are maybe newer, Softgate Capital Research is our research arm at Softgate Capital—we serve up institutional-quality stock and macro research that’s accessible to retail investors. That’s our whole thing, really. So if you want more detail than we can cover on the pod, definitely check out our Skanska report online.

David Mitchell

Alright, let’s tee up Skanska’s story in a nutshell. You’ve got a high‑quality contractor coming out of a pretty rough patch—2023 was a down year, no sugarcoating it. But here’s what sets them apart: Skanska enters 2025 with a strong balance sheet, a net cash position—roughly SEK 9 to 13 billion, depending on the season—and not to mention, a dividend yield right around 3 percent and climbing. The stock trades at SEK 250, we’ve set a price target at 280, which means there’s not just recovery upside, but a degree of downside protection if things hit another snag.

Emily Carter

I think that’s exactly why construction cycles are fascinating right now, David. Skanska’s a textbook for balancing risk and reward in a cyclical business. You don’t get many stories where management consistently steps out of overheated markets, or hits pause on chasing volume just to land another project. Especially when their business model, like you said, bakes in that optionality from development wins. It’s not just about pouring concrete—they’re ready to pivot if, say, interest rates fall or new infrastructure money lands.

David Mitchell

Right. They’re kind of a rare breed—most of their pure-play contractor peers are either heavily leveraged or way more exposed to their local housing markets. Skanska’s balance sheet gives them breathing room, both when times are good and in a downturn. And that’s critical when you’re thinking about value—those dividends, the cash position, and that optional upside if development rebounds...

Emily Carter

And, David, for listeners, we’ve talked on previous episodes about how cyclical troughs are sometimes where the best rebound opportunities crop up—whether it was with Rheinmetall in defense or Aston Martin’s big turnaround push. Skanska fits right into that mold as a disciplined operator coming out the other side.

Emily Carter

So, what actually makes Skanska different from your typical contractor? They’ve got this integrated model—it’s not just high-volume, razor-thin construction work. They also do targeted, higher-margin project development. But, David, how does Skanska avoid the trap of just saying “yes” to any bid that shows up?

David Mitchell

That’s a good question. Their approach is more deliberate than a lot of peers. Skanska’s management has focused on margin over volume, especially since their restructuring in 2018 and 2019. They intentionally pass on low-margin, high-risk contracts—happy to let competitors take those. Instead, they bid selectively, enter markets where they have expertise, and only launch development projects when those hit specific return hurdles. Which, frankly, a lot of contractors say they’ll do, but Skanska’s actually pulled back in weak segments, like when they cut their UK operations that weren’t profitable.

Emily Carter

That selective attitude seems like a strategic asset, but it does make the business somewhat lumpy, right? Like, they get some boom years for development, and then they can have dry spells if the real estate or office market is soft. But overall, that broad diversification and their scale—30,000 employees, SEK 170–180 billion in annual revenue—let them weather local and sector-specific storms.

David Mitchell

And let’s not forget—Skanska’s won marquee projects across continents: massive highways in the US, hospitals in the UK, commercial towers in Scandinavia. Their brand is a big part of why they make those shortlists, plus their reputation for quality and for delivering on time, on budget. Oh, and sustainability—Skanska’s a recognized green builder. That’s not just topping ESG surveys, it’s basically table stakes for public-private contracts now, especially in Europe.

David Mitchell

Let’s walk through what’s actually happened with Skanska’s numbers, because the story’s got more ups and downs than most blue-chip industrials. Revenues are fairly steady— 140 to 180 billion SEK basically every year. But profits? More of a rollercoaster. 2021, they hit the jackpot—operating margins close to 7 percent, huge development gains, and EPS of nearly 20 SEK. Then, in 2023, the bottom fell out. Development segments, especially residential, got hammered by rate hikes and a weaker real estate market. They took over 3 billion SEK in write-downs. Group margins were down to about 2 percent, and operating income cratered by 65 percent.

Emily Carter

But the underlying construction business kept ticking along, even during that 2023 trough—margins pretty steady at 3 to 4 percent. It was really development that tanked, not construction execution. And 2024 tells a much better story: construction margins bounced back, development stabilized—commercial developments not quite at former glory but back to profit—and net cash is close to 9 to 13 billion SEK, depending on quarter. So, they’ve come out of the trough with cash intact and a really strong order book, right?

David Mitchell

Exactly. That’s what gave us conviction when we re-initiated with “Overweight”—management moved quickly to reduce risk, cut losses, and so the base construction business is a lot more resilient than maybe the headline earnings volatility suggests. Their 2024 return on equity is around 10 percent; management targets getting that back up to mid-teens, and if development does pick up, that’s not out of reach at all.

Emily Carter

And for listeners who maybe remember our episode on HCA Healthcare’s margins, it’s a reminder that you can have a thin-margin business—if you manage risk tightly, it’s still a strong compounding platform. Skanska’s cycle discipline really stands out here.

Emily Carter

Let’s dig into where Skanska’s money’s actually made, by segment. Construction’s about 95 percent of 2024 revenue— 168 billion SEK. But in terms of operating profit, development can really punch above its weight in good years. For example, in 2021 and 2022, commercial property development was a huge profit driver. Now, David, what’s going to push profits in 2025?

David Mitchell

It all comes down to the macro tailwinds—for Skanska, we’re looking at infrastructure spending cycles, especially in the U.S. with federal funds rolling out, and growing investment in green construction in Europe. They’re also seeing growth in multi-family housing in the Nordics. The big swing factors will be project completions, new contract wins, and when central banks might start to ease rates. If mortgage costs come down, residential demand snaps back; if governments accelerate infrastructure allocations, that big U.S. backlog grows.

Emily Carter

It’s worth calling out the order book here. As of Q3 2025, their total construction backlog is 249 billion SEK—that’s nearly one and a half years’ worth of construction revenue pre-booked. The U.S. is becoming an even larger profit center, with strong operating margins, and their development pipeline in American cities like Boston and Seattle is growing. That geographic and sector diversification is key, I think, especially if any one market hits a rough patch.

David Mitchell

Right. And the development segments—especially commercial—may bounce back faster in places where demand for high-end office and mixed-use remains solid, like those select U.S. metro areas. In the Nordics, they’re betting on resurgent housing demand when policy or rates shift. So, segment-wise, the story’s not just about construction holding steady, but development regaining profitability on a selective, project-by-project basis. I know that sounds wonky, but it’s really about skewing future profit growth toward those higher-margin pockets.

David Mitchell

So, bringing all that back to valuation—why is Skanska trading where it is? At about 250 SEK a share, trailing P/E is mid-16s, but on 2025 numbers, we get closer to 14 times earnings, with our price target sitting at 280 SEK. That’s in line or just above regional peers like NCC and Peab, and also the big European players—Vinci, Eiffage, Strabag. The difference? Skanska’s balance sheet is stronger—they’re net cash, versus a lot of peer debt—and they aren’t weighed down by concession-heavy segments like toll roads that muddy up the multiples.

Emily Carter

I always mix this up, but their EV/EBITDA’s about 9 and a half to 10 times on trailing, and should pull down below 8 if our 2025 profit forecast is hit, which is perfectly fine for a high-quality franchise with embedded growth and not much leverage. That price-to-book of 2.2 times is also defensible, since their assets are mostly real, and there’s a lot of hidden value creation in the development pipeline that won’t show up in book value until projects are sold off.

David Mitchell

It’s weird—oftentimes investors want a discount just because it’s a cyclical, but if you think the cycle’s turning, that’s exactly when you want to be paying a fair multiple on trough or mid-cycle earnings. What’ll move the multiple up to the price target? Easiest answer: proof that earnings are normalizing, big project wins, and evidence that development profits aren’t just a one-off blip in the boom years but are structurally stronger now.

Emily Carter

And if rates fall, or the U.S. government expedites infrastructure spending, you could easily see that price target hit. It’s just a matter of the market getting more comfortable that last year’s drawdown was a cycle blip—not a new normal for Skanska’s profit power.

Emily Carter

Let’s not get ahead of ourselves—it isn’t all blue skies. What could trip up the thesis here? Construction margin pressure is always lurking; one or two problem projects or raw material spikes can eat up profit fast. Property market weakness—that’s a wildcard, especially if office demand stays sluggish or rates stay high. Plus, every large project is execution risk by definition... delays, overruns, all of it.

David Mitchell

And don’t forget currency swings. A strong krona versus the U.S. dollar eats into reported profits. Also, macro-level stuff: if governments delay infrastructure awards, or if bond yields keep climbing, Skanska’s cost of capital goes up and development profits look less attractive. But, on the flipside, there are genuine catalysts: a rate cut could unlock a surge in Nordic residential, infrastructure awards could drop any quarter, and Skanska has a pipeline of potential asset sales if markets thaw. That could mean real upside surprises in results.

Emily Carter

So, David, if you could watch one indicator over the next twelve months to test our thesis—what would it be?

David Mitchell

I’m probably watching U.S. infrastructure awards—actual project wins announced, not just won on paper. If those flow through in volume, that’ll signal Skanska’s backlog is turning into top-line and profits. Emily, what about you?

Emily Carter

For me, it’s got to be Swedish residential sales—are they moving up quarter on quarter, or do they keep sitting on unsold inventory? That’s the canary for development segment normalization. If we see home sales accelerating, that’s green shoots for medium-term upside. If not, maybe we’re not as far along the cycle as we want to think.

David Mitchell

To wrap up, Skanska represents the kind of disciplined cyclical play that we love—not dependent on extreme macro optimism, but with enough balance sheet strength and diversification that you get rebound potential and some shelter if things do stay bumpy. This isn’t a swing-for-the-fences high-flier; it’s a core holding for the patient cyclical investor.

Emily Carter

As always, we’d love to hear what you want to know more about—send us your questions, let us know if you want a future episode on infrastructure policy, green construction, really anything in the sector. We could do a whole deep dive into how these policy changes actually flow down to the companies building the roads, if you’re interested.

David Mitchell

And just our quick disclaimer—this podcast and our research are for informational purposes only, not investment advice. We use sources we believe are reliable, but can’t guarantee accuracy or completeness. Always do your own work and consult with a financial advisor before making investment decisions.

Emily Carter

That’s it for this episode of Global Equity Research. Thanks for joining us—David, always a pleasure.

David Mitchell

Thanks, Emily, and thanks to all our listeners. We’ll see you next time.