LONDON - Swedish stocks may well continue to be in demand as manufacturers in particular proved their ability to swiftly adjust to a slump in demand during this earnings season, London analysts told The Swedish Wire.

Investors can breathe a sigh of relief as earnings season draws to a close following largely better-than-expected results from some of Sweden’s heavyweights. Analysts turned more bullish and particularly praised the ability of Sweden’s manufacturers to swiftly adjust to a slump in demand.

The lock-maker Assa Abloy emerged as one of the stars of the season, impressing in particular with its restructuring efforts. Morgan Stanley, Credit Suisse, Merrill Lynch and UBS all raised their estimates and target prices for the stock following the interim results on July 29th 2009.

“The defensive quality illustrated by Assa Abloy again in this quarter is central to our Overweight investment thesis,” Morgan Stanley analysts said in a note to clients.

“Restructuring potential is progressing ahead of plan, and we expect demand for renovation and maintenance (66% of sales) to rebound earlier than new construction,” the broker added. “What was striking about the results, was how quickly Assa Abloy has been able to take cost out of the business, and how much extra restructuring it has been doing over and above the longer-term plant relocation program,” said Merrill Lynch.

Looking ahead, UBS also noted that further significant margin declines are unlikely, while Merrill Lynch anticipates that the group may well beat forecasts once more going into 2010. Merrill Lynch has a “Buy” rating on the stock, which already gained more than 18 percent over the past three months, but is still 23 percent shy of where it stood at the end of July 2007. Merrill Lynch and Credit Suisse both have a target price of 135 Swedish kronor for the share.

Electrolux was also in favor as it beat consensus with its second quarter results. Citigroup highlighted the manufacturer’s leaner balance sheet. The broker has a “Buy” rating and 150 Swedish kronor target price on the stock. This implies another 11 percent upside potential at current prices after the share clocked up some 15 percent since the earnings release on July 16 2009.