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On Monday, UBS analysts adjusted their stance on ACS Actividades de Construccion y Servicios SA (ACS:SM) (OTC: ACSAY), downgrading the stock rating from Buy to Neutral. Despite the downgrade, the price target was increased to EUR56.00, up from the previous EUR49.00. The company, with a market capitalization of $15.1 billion, has demonstrated strong momentum with a 29.7% price return over the past six months.
The revision by UBS comes after a period of significant appreciation in the company’s share value. UBS analysts pointed out that the shares have experienced a strong re-rating, which now suggests a more limited potential for upside. While the firm’s construction assets remain appealing, with Turner, accounting for 42% of SOP, recognized as a high-quality U.S. business with attractive growth potential, and CIMIC, representing 11% of SOP, well positioned to benefit from Australasian infrastructure opportunities, the current market consensus for net income in 2025 is already at the upper end of the guidance range. According to InvestingPro analysis, the company’s current P/E ratio stands at 16.85, with revenue growing at 16.5% over the last twelve months. InvestingPro’s Fair Value analysis suggests the stock is slightly undervalued at current levels.
The analysts also noted that the valuation of ACS Actividades has increased to approximately 18 times the estimated 2025 earnings, a jump from around 15 times in October 2024. This re-rating prompts a more cautious outlook from UBS. It’s worth noting that InvestingPro data reveals the company has maintained dividend payments for 36 consecutive years, demonstrating strong financial stability. Get access to 8 more exclusive InvestingPro Tips and comprehensive financial metrics to make more informed investment decisions.
Furthermore, the report from UBS acknowledges that approximately 60% of ACS Actividades’ sales are exposed to the U.S. market, which has seen key peers undergoing a de-rating recently. While the anticipated growth in German infrastructure investment in the coming years could be beneficial, it is also highlighted that the company’s exposure to the German market is minimal, at roughly 2% of sales. The company maintains a solid financial position with an InvestingPro Financial Health Score of "GOOD" and operates with a moderate level of debt.
UBS’s decision to downgrade the stock reflects a recalibration of expectations in light of the company’s recent share performance and broader market trends. The new price target of EUR56.00, however, indicates that UBS still sees some value in the stock, albeit with a more conservative outlook than before.
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