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Investing.com - RBC Capital upgraded SGS SA (SWX:SIX:SGSN) (OTC:SGSOY) from Underperform to Sector Perform on Tuesday, while raising its price target to CHF86.50 from CHF83.00.
The upgrade follows SGS’s planned acquisition of ATS, which RBC expects to be integrated at the beginning of next year. The deal is projected to drive earnings per share estimate upgrades of approximately 4% for fiscal year 2026 and 5% for fiscal year 2027.
RBC noted that while the acquisition appears to be dilutive to return on invested capital in the short term, it "makes strategic sense and is DCF valuation-enhancing." This strategic fit underpins the 4% increase in RBC’s price target and the subsequent rating upgrade.
The investment firm also pointed to solid demand in the global Testing, Inspection and Certification (TIC) market, suggesting that industry fundamentals remain strong for SGS’s core business.
RBC further indicated that tariff risks have likely peaked, and the firm believes "the scope for further material valuation multiple compression is limited at current levels" for SGS shares.
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