On Wednesday, BMO Capital maintained a positive outlook on shares of Axalta Coating Systems (NYSE:AXTA), raising the stock's price target to $48.00 from $46.00 and reaffirming an Outperform rating. The firm's confidence in the company stems from its anticipated top-line growth acceleration, incremental margin lift, and increased free cash flow (FCF).
The analyst from BMO Capital expressed that, despite challenging macroeconomic conditions, discussions with Axalta's management have solidified the belief that the company is on track for sustained double-digit earnings per share (EPS) growth. This growth is expected to be supported by a significantly strengthened balance sheet, which will enable Axalta to engage in share buybacks and targeted mergers and acquisitions (M&A).
According to the analyst, Axalta's enhanced growth, profitability, and returns pave the way for potential earnings that could surpass consensus estimates and lead to multiple expansion. The revised 12-month target price reflects this optimism.
The recommendation from BMO Capital underscores Axalta as their preferred small to mid-cap (SMID-cap) investment choice. The firm anticipates that the company's strategic moves will lead to a favorable outcome for shareholders, as Axalta continues to navigate the competitive landscape of the coating systems industry.
In other recent news, Axalta Coating Systems has been making significant strides in its financial performance. Evercore ISI has assigned an Outperform rating to Axalta with a price target of $47, highlighting the company's leadership in Refinish and Mobility coatings.
Similarly, RBC Capital has maintained its Outperform rating on Axalta, increasing the price target to $46 from $44, acknowledging the company's earnings growth attributed to reduced costs and strong performance in the Refinish segment.
KeyBanc has also raised its price target on Axalta to $45 from $44, maintaining an Overweight rating, citing Axalta's third-quarter performance as a significant indicator of investor confidence.
Axalta reported record net sales of $1.32 billion during its Third Quarter 2024 Earnings Call, marking a 15th consecutive quarter of year-over-year growth. The company raised its full-year 2024 adjusted EBITDA outlook to exceed $1.1 billion and adjusted diluted EPS to approximately $2.15, indicating a 37% increase from the previous year.
The acquisition of CoverFlexx has been identified as a significant growth driver, particularly in the refinish business. These recent developments underline Axalta's commitment to growth and efficiency, as well as its success in navigating market challenges.
InvestingPro Insights
The recent analysis from BMO Capital aligns well with several key metrics and insights from InvestingPro. Axalta Coating Systems (NYSE:AXTA) currently boasts a market capitalization of $8.64 billion, reflecting its significant presence in the coating systems industry. The company's P/E ratio of 26.59, when adjusted for the last twelve months, drops to 20.55, suggesting a potentially attractive valuation relative to its earnings.
InvestingPro Tips highlight that Axalta is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.68. This supports BMO Capital's optimistic outlook on the company's growth potential. Additionally, the company's strong return over the last three months, with a 17.4% price total return, and its trading near its 52-week high (98.07% of the high) corroborate the positive sentiment expressed in the analyst's report.
The company's financial health appears robust, with InvestingPro Data showing a revenue of $5.26 billion in the last twelve months and an EBITDA growth of 27.75%. This solid financial performance backs BMO Capital's expectations for top-line growth acceleration and increased free cash flow.
For investors seeking more comprehensive insights, InvestingPro offers 11 additional tips for Axalta Coating Systems, providing a deeper understanding of the company's potential and risks.
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