LG Electronics, Earnings Shock Leads to Sharply Lowered Expectations

LG Electronics Records Earnings Shock in Q4 Last Year
Stock Price Turns Down After 6 Trading Days... Securities Firms Lower Target Prices
Must Prove New Business Impact Through Performance

LG Electronics recorded an 'earnings shock' in the fourth quarter of last year, leading securities firms to lower their expectations one after another. There is an opinion that the effects of new businesses must be proven through actual performance for the stock price to rise.

According to the Korea Exchange on the 10th, LG Electronics closed at 85,800 won, down 1.15% from the previous day. The stock price turned downward after six trading days, putting an end to the upward streak that had continued since the beginning of this year.

The stock price decline of LG Electronics is attributed to disappointment over the fourth-quarter earnings of last year. On the 8th, LG Electronics announced that its operating profit for the fourth quarter of last year was 146.1 billion won, a 53.3% decrease compared to the same period last year. This figure was 63.2% below the consensus (average forecast by securities firms). Sales recorded 22.7775 trillion won, down 1.4%. Junseo Park, a researcher at Mirae Asset Securities, analyzed, "Sales met the consensus, but operating profit recorded a performance 63.2% below expectations. Despite achieving the highest annual sales ever amid demand slowdown, seasonal marketing expenses, increased freight costs at year-end, and panel price increases led to a deterioration in profitability."

Sanghyun Park, a researcher at Korea Investment & Securities, said, "Although the sluggish performance of the consolidated subsidiary LG Innotek is a factor, the deterioration in the core businesses such as home appliances, TVs, and automotive components was more pronounced." He estimated, "On a separate basis for the fourth quarter, operating loss was 104.8 billion won, worsening from 98.3 billion won in the same period last year. The expected effects of new businesses such as B2B (business-to-business) and subscription home appliances in the home appliance (H&A) sector and the webOS in home entertainment (HE), which were anticipated to mitigate seasonal earnings fluctuations, were below expectations."

Following the earnings shock that significantly missed market expectations, securities firms have successively lowered their target prices for LG Electronics. After LG Electronics' earnings announcement, six securities firms lowered their target prices. Mirae Asset Securities adjusted its target price down from 150,000 won to 120,000 won, Korea Investment & Securities from 160,000 won to 120,000 won, KB Securities from 120,000 won to 110,000 won, and Shinhan Investment Corp. from 130,000 won to 120,000 won. Samsung Securities lowered its target price from 135,000 won to 120,000 won, and Heungkuk Securities from 130,000 won to 115,000 won.

Dongwon Kim, a researcher at KB Securities, explained, "We lowered LG Electronics' target price by 8% from the previous level, reflecting the fourth-quarter earnings that fell short of expectations and revising the 2025 operating profit down by 7% to 3.2 trillion won." He added, "In the home appliance business, despite the expansion of shipments in the volume zone of entry-level products, a slowdown in premium home appliance demand due to a sluggish domestic economy and rising logistics costs are expected. In the TV sector, panel price increases and cost burdens caused by exchange rate volatility?due to raw materials purchased in dollars?are anticipated. The automotive components and business solutions businesses are expected to see profitability decline due to slowing sales growth of electric vehicle parts and delays in new business performance improvements."

For the stock price to rise, the effects of new businesses need to be proven through actual performance. Researcher Sanghyun Park pointed out, "While the intention to conduct an initial public offering (IPO) in India and expand shareholder returns is positive, concerns about tariffs under the second Trump administration in the U.S. and the electric vehicle chasm (temporary demand stagnation) are more prominent. For the stock price to rise, profitability improvements resulting from the effects of new businesses must be demonstrated through actual results."

Improvement in the performance of subsidiaries is also necessary. Researcher Kim said, "For a future revaluation of LG Electronics' valuation, it is necessary to reduce earnings volatility through expanding B2B sales centered on heating, ventilation, and air conditioning (HVAC), break away from a sales structure centered on B2C (business-to-consumer) by expanding new businesses in the home appliance and TV sectors, reduce business solutions deficits through restructuring new businesses, and improve profitability of affiliates such as LG Innotek and LG Display."