Legrand's Resilient Growth Amid Market Headwinds: A Deep Dive Into Q1 2025 Results

Legrand (LRDG.PA), a global leader in electrical and digital infrastructure solutions, reported €2.28 billion in sales for Q1 2025, marking a robust 12.3% year-over-year increase from Q1 2024’s €2.028 billion. This resurgence follows a challenging 2024, during which the company faced a reported sales decline of 5.6% (or -3.7% excluding currency fluctuations and geopolitical impacts in Russia). The results highlight Legrand’s ability to navigate cyclical pressures in its core markets while capitalizing on structural growth opportunities.

Key Drivers of Q1 2025 Growth

The 12.3% sales jump reflects a combination of factors:
1. Margin Resilience: Despite a contracting building market in 2024, Legrand maintained profitability through cost discipline and pricing power. Management emphasized that margins held steady even as revenue dipped in 2024, a sign of operational strength.
2. Regional Diversification: While 2024 sales were dragged down by weakness in Europe’s construction sector, Q1 2025 saw stronger contributions from North America and Asia-Pacific. These regions, particularly the U.S. and China, are key markets for Legrand’s smart building technologies, which are in high demand amid digitization trends.
3. Strategic Portfolio Shifts: The company has leaned into high-margin segments like data center infrastructure and energy-efficient systems, which now account for a larger share of revenue. This pivot is paying off as legacy construction markets stabilize.

Digging into the Numbers

The contrast between 2024 and 2025 is stark. In Q1 2024, Legrand’s sales fell to €2.028 billion due to a “building market in retreat,” as noted in the financial commentary. The decline was exacerbated by headwinds in Russia and currency headwinds, which added volatility. Fast-forward to Q1 2025, and the rebound to €2.278 billion signals a recovery in construction activity and stronger demand for Legrand’s differentiated products.

Implications for Investors

The Q1 results underscore Legrand’s positioning as a beneficiary of two long-term trends:
1. Smart Infrastructure Demand: The global push for digitized buildings and energy-efficient systems is creating recurring revenue streams for Legrand. Its solutions for smart lighting, connectivity, and automation are increasingly essential for commercial and residential projects.
2. Resilience in Cyclicality: While construction markets remain cyclical, Legrand’s focus on high-value niches has insulated it from pure commodity price pressures. This is evident in its ability to grow margins even during downturns, as seen in 2024.

Risks to Watch

Despite the strong quarter, challenges linger. The European building market, which accounts for roughly half of Legrand’s sales, is still recovering. Delays in infrastructure projects and supply chain disruptions could temper growth. Additionally, geopolitical risks, particularly in Russia and Eastern Europe, remain unresolved.

Conclusion: A Buy or Hold?

Legrand’s Q1 2025 results are a clear positive for investors, with the 12.3% sales growth demonstrating management’s execution in a recovering market. The company’s margin stability during 2024’s downturn and its strategic focus on high-margin segments provide a solid foundation for future gains.

Key data points to consider:
- Revenue Growth: 12.3% YoY in Q1 2025 vs. a -5.6% decline in Q1 2024.
- Margin Resilience: Gross margin held at 38.5% in 2024 despite top-line pressures.
- Forward Momentum: Orders in early 2025 suggest continued strength, with management citing “positive momentum” in its key markets.

For investors, Legrand offers exposure to secular trends in smart infrastructure at a valuation that appears reasonable. At current levels, the stock trades at ~15x 2025E EPS, a discount to its 5-year average. However, investors should monitor European construction activity and geopolitical risks closely.

In a sector still grappling with volatility, Legrand’s Q1 performance marks it as a stock to watch for those seeking quality in cyclical equities.