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On Monday, UBS analyst Joshua Spector upgraded shares of Axalta Coating Systems (NYSE:AXTA), a leading global coatings provider, from Neutral to Buy. The price target was adjusted to $40.00, down from the previous $42.00. With the stock currently trading at $29.73 and showing a perfect Piotroski Score of 9 according to InvestingPro, Spector’s analysis suggests that Axalta’s stock is already reflecting the potential downside risks.
Axalta’s business is somewhat tied to the automotive industry, with approximately 35% of its sales connected to the production of light and commercial vehicles. Only half of this percentage is attributed to North America, which the UBS analyst estimates to be around 10% of Axalta’s total sales on an EBITDA basis. InvestingPro data shows the company maintains a healthy gross profit margin of 34.08% and generated $992 million in EBITDA over the last twelve months.
The company’s Performance segment, which includes Industrial and Refinish operations, is noted for its stability and has historically performed well through economic cycles. The segment, which accounts for a significant portion of Axalta’s sales, benefits from being driven by vehicle usage rather than production.
Spector highlighted Axalta’s recent achievements, which include securing new business that is expected to boost volumes in the Auto OEM and industrial sectors over the next year. Additionally, Axalta’s management has been commended for consistently surpassing EBITDA guidance by approximately 5% each quarter, despite challenging macroeconomic conditions.
While UBS has adopted a more conservative stance for Axalta’s 2025 EBITDA projections, reducing estimates by about 2% and falling slightly below consensus, Spector believes that the market has overly discounted Axalta’s earnings potential. According to UBS, the current market valuation implies an EBITDA nearly 20% below consensus, which may offer an attractive entry point for investors. This view is supported by InvestingPro analysis, which indicates the stock is currently undervalued, with additional ProTips suggesting oversold conditions and strong financial health metrics available to subscribers.
In other recent news, Axalta Coating Systems reported strong fourth quarter earnings, with adjusted earnings per share of $0.60, surpassing the consensus estimate of $0.51. The company achieved revenue of $1.31 billion for the quarter, aligning with analyst projections. Net sales increased by 1% year-over-year, while net income rose 85% to $137 million. Axalta also reported a record fourth quarter Adjusted EBITDA of $275 million, with a margin improvement to 21.0%. Looking ahead, the company anticipates full year 2025 net sales between $5.35 billion and $5.4 billion and Adjusted EBITDA of $1.15 billion to $1.175 billion.
In response to these developments, Mizuho (NYSE:MFG) Securities raised Axalta’s stock price target to $44, maintaining an Outperform rating. BMO Capital Markets also maintained an Outperform rating with a $51 price target, citing Axalta’s strategic pricing and cost efficiency measures. Meanwhile, Citi adjusted its price target to $42, maintaining a Neutral rating. Axalta’s proactive strategies in pricing and market share expansion have been recognized by analysts, positioning the company for potential growth despite foreign exchange headwinds and softer end-markets.
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