Atlas Copco stock target raised to SEK200 by CFRA

On Tuesday, CFRA, a prominent research firm, increased its price target on shares of Atlas (NYSE:ATCO) Copco AB (ATCOA:SS) (OTC: ATLKY), adjusting the figure to SEK200.00 from the previous SEK190.00. Despite this change, the firm maintained a Hold rating on the stock. According to InvestingPro data, the stock is currently trading at elevated multiples, with a P/E ratio of 27.4x and high EBITDA valuation multiples, suggesting premium pricing relative to peers. Firdaus Ibrahim, an analyst at CFRA, provided insights into the rationale behind the adjustment. "We lift our 12-month target price for Atlas Copco (ATCO) to SEK200 (SEK190), based on a 2025 P/E of 29.9x, largely in line with its five-year average forward P/E of 28.4x," Ibrahim stated.

The research firm revised its earnings per share (EPS) estimate for 2025 to SEK6.68, down from the earlier prediction of SEK6.91, and established a 2026 EPS target at SEK7.13. Atlas Copco’s fourth-quarter revenues for 2024 were reported to have increased by 2% year-over-year to SEK46.0 billion, marking a record high despite no organic growth. With a market capitalization of $71.5 billion and an "GREAT" financial health score on InvestingPro, the company maintains a strong market position, supported by 45 consecutive years of dividend payments. Orders received during the same period saw an 8% year-over-year rebound, with 4% being organic growth.

The performance across Atlas Copco’s divisions was uneven, with the Vacuum Technique division experiencing an 8% year-over-year decline in sales. Meanwhile, the Compressor Technique, Industrial Technique, and Power Technique divisions experienced growth of 3%, 4%, and 15% respectively. The company’s operating margin improved to 21.8%, up from 20.2% in 2023, with favorable currency effects contributing to this increase.

Atlas Copco’s management has revised its outlook for 2025, now anticipating that customer activity will maintain its current levels, a more optimistic view compared to previous expectations of a decline. CFRA’s analyst commented on the updated outlook and the recent performance, stating, "While the sequential improvement in orders is encouraging, we remain cautious on the timing of a broader demand recovery, given the uncertain macroeconomic outlook." For deeper insights into Atlas Copco’s valuation and growth prospects, InvestingPro subscribers can access 16 additional ProTips and comprehensive financial metrics, including detailed analysis of the company’s market position and future potential. This cautious stance reflects the underlying uncertainty in the global economic environment despite the company’s current performance and management’s positive outlook.

In other recent news, Atlas Copco reported a stable Q3 2024 performance despite mixed market demand and challenges. The company demonstrated organic growth in orders, though revenues experienced a slight organic decline. Operating profit margin dipped due to restructuring costs and currency fluctuations, but the overall financial metrics remained robust, showing a profit for the period and a strong return on capital employed.

In the same vein, Atlas Copco completed 10 acquisitions during the quarter, contributing to its financial stability. Morgan Stanley (NYSE:MS), in their analysis, recently upgraded Atlas Copco’s stock to an Equalweight rating, acknowledging the company’s status as a high-quality growth company while also noting potential challenges in its various divisions.

Furthermore, the Vacuum Technique division is expected to face a gradual recovery, with a forecasted modest decline in semiconductor capital expenditures in 2025. Concerns were also raised about the Industrial Technique division’s exposure to the challenging European automotive sector. Despite these issues, Atlas Copco anticipates an effective tax rate of around 22.5% for Q4 and maintains a positive outlook for the semiconductor market.

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