Investing.com -- Shares in Schneider Electric fell by 3% on Tuesday after J.P. Morgan downgraded the energy management and industrial automation group to "neutral" from "overweight", saying its PTC and Cognite deals shift the investment case towards the less attractive Industrial Automation division.

The brokerage cut its December 2027 price target to €310 from €345 and lowered its target multiple to 18.5 times FY27 EV/EBITA from 20.5 times, reflecting its view of the company’s evolving capital discipline.

J.P. Morgan’s previous "overweight" view was based on organic growth in Schneider’s Energy Management division, which accounts for about 85% of group profit. Analyst Phil Buller said the PTC deal weighs on the valuation multiple, despite potential benefits across the group.

Schneider agreed to buy PTC in an all-cash deal at $205 per share, valuing the software company at about $22.6 billion in equity value and $23.7 billion in enterprise value. The offer represents a 42.3% premium to PTC’s previous closing price.

J.P. Morgan said the roughly $20 billion decline in Schneider’s shares the previous day was "mathematically oversold" relative to the proposed deal’s roughly $24 billion enterprise value.

It said the move was disproportionate, noting the stock had risen close to record highs after Schneider’s Singapore presentation on its Energy Management portfolio and a bullish pre-close call. The shares are now at the same level as in mid-September, it said.

The brokerage described PTC as a good asset overall and expects the deal to close by the third quarter of 2027, as the companies have said, with limited risk from antitrust or regulatory approvals in China and the United States.

J.P. Morgan also said its preference within the sector shifts to Legrand following Schneider’s Singapore capital markets day.

Schneider expects €250 million in annual cost savings by the third year and about €800 million in revenue synergies. J.P. Morgan said the cost savings target appears feasible but called the revenue target "somewhat ambitious.”

It also questioned whether there could be dis-synergies given PTC’s previously strong relationship with Rockwell.

Schneider plans to fund the roughly €22 billion cash consideration with an equity issue of about €5 billion to €6 billion and new debt of about €16 billion to €17 billion, backed by a committed bridge facility. The company expects to pause share buybacks in 2027 and 2028.

J.P. Morgan raised its adjusted earnings-per-share estimates to €11.26 for 2026 from €10.98 and to €12.97 for 2027 from €12.69, citing currency effects and takeaways from Friday’s pre-close call.

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