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On Thursday, JPMorgan analyst Jeffrey Zekauskas downgraded Axalta Coating Systems (NYSE:AXTA), a leading global coatings provider with $5.28 billion in annual revenue, from Overweight to Neutral. Alongside the rating change, the price target was significantly reduced from $42.00 to $32.00. The adjustment reflects concerns about potential challenges in the automotive and industrial coatings sectors, which may impact the company’s performance. According to InvestingPro data, Axalta maintains strong financial health with a perfect Piotroski Score of 9, indicating robust operational efficiency.Want deeper insights? InvestingPro offers comprehensive analysis with 6 additional key tips about Axalta’s financial position.
According to Zekauskas, there is a notable risk of weakness in the global auto OEM market, the North American Refinish market, and the industrial coatings end-markets. These factors could potentially lead to volume and earnings disappointments for Axalta later in the year. The downgrade comes amid comparisons with PPG Industries (NYSE:PPG), a competitor with similar market exposures. Despite these concerns, Axalta maintains strong fundamentals with a healthy current ratio of 2.01, indicating solid ability to meet short-term obligations.
Despite Axalta trading at a (2.5x) EBITDA multiple discount to PPG (WA:IBSP), JPMorgan no longer views the stock as relatively attractive. The analyst pointed out that Axalta’s current trading at 8.3x its estimated 2025 EV/EBITDA and 7.7x for 2026 is less convincing when compared to PPG’s 10.8x for 2025 and 10.3x for 2026. This is partially due to PPG’s divestment of its underperforming domestic architectural coatings operation and its sizeable architectural paint business, which may offer more stable returns. Based on InvestingPro’s Fair Value analysis, Axalta appears undervalued at current levels, with the stock trading at a P/E ratio of 16.22x.
Zekauskas mentioned that the EBITDA growth prospects for Axalta and PPG do not appear to be materially different over time, suggesting a leveling of the playing field between the two companies. This assessment has influenced the decision to downgrade Axalta’s stock rating and adjust the price target accordingly. The revised outlook by JPMorgan signals caution to investors regarding Axalta’s year-ahead performance in light of the anticipated market challenges. Current market data shows Axalta generating $992 million in EBITDA, with analysts maintaining a consensus recommendation of 1.86, indicating a moderate buy stance despite the recent downgrade.
In other recent news, Axalta Coating Systems announced its first-quarter 2025 financial results, reporting an adjusted diluted earnings per share (EPS) of $0.59, surpassing analyst expectations of $0.55. However, the company’s revenue was $1.26 billion, slightly below the anticipated $1.29 billion. Despite the revenue miss, Axalta demonstrated strong operational efficiency, achieving a 16% year-over-year increase in adjusted diluted EPS and a 4% rise in adjusted EBITDA. The company also saw a 110 basis point improvement in gross margin, marking the 10th consecutive quarter of margin growth. Axalta projects full-year net sales between $5.3 billion and $5.375 billion, with adjusted EBITDA margins expected to approach 22%. The company plans to generate free cash flow between $475 million and $500 million, while also addressing approximately $25 million in tariff impacts. CEO Chris Villaverine expressed confidence in the company’s strategic direction, emphasizing operational excellence and resilience amid an uncertain environment.
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