On Friday, RBC Capital maintained its Outperform rating on Axalta Coating Systems (NYSE:AXTA) stock while increasing the price target to $46.00 from the previous $44.00. The firm recognized Axalta's earnings growth despite a softer top line in its Commercial Vehicle and Industrial segments. This growth was attributed to reduced costs and strong performance in the Refinish segment, which experienced organic growth through business wins, pricing strategies, and the recent CoverFlexx acquisition.
The analyst noted that Axalta has consistently surpassed its earnings guidance, highlighting the company's effective management and execution. Additionally, there is optimism around Axalta's free cash flow (FCF) growth and anticipated Transformation savings, projected to be $10 million in 2024 and $35 million in 2025.
In light of these factors, RBC Capital has made slight adjustments to its forecasts for Axalta's earnings before interest, taxes, depreciation, and amortization (EBITDA). The revised estimates are now $274 million for Q4, with $1.115 billion for the full year of 2024 and $1.170 billion for 2025. These figures are up from the previous estimates of $269 million, $1.095 billion, and $1.15 billion, respectively.
The raised price target to $46 is based on an unchanged valuation multiple of 11.5 times the firm's projected FY25 EBITDA. This adjustment reflects the analyst's confidence in Axalta's cost management and growth within its Refinish segment, despite certain challenges in other areas of its business.
In other recent news, Axalta Coating Systems has been making significant strides in its financial performance. The company 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.
Furthermore, Axalta 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.
Analysts at KeyBanc and BMO Capital Markets have shown confidence in Axalta's growth trajectory. KeyBanc raised its price target on Axalta to $45.00, up from the previous $44.00, maintaining an Overweight rating. They highlighted Axalta's third-quarter performance as a significant indicator of investor confidence. BMO Capital Markets also raised the price target to $46.00, maintaining an Outperform rating, citing the company's strong performance, successful cost and efficiency initiatives, and robust free cash flow.
Despite a projected 2-3% decline in body shop wins, Axalta remains confident in its growth strategies. These recent developments underline Axalta's commitment to growth and efficiency, as well as its success in navigating market challenges. The company's ongoing transformation initiatives have strengthened its infrastructure, positioning it for future growth.
InvestingPro Insights
Axalta Coating Systems' recent performance aligns with RBC Capital's optimistic outlook. According to InvestingPro data, the company's market capitalization stands at $8.27 billion, with a P/E ratio of 25.73. Notably, Axalta's revenue for the last twelve months as of Q3 2024 reached $5.26 billion, showing a modest growth of 2.7%.
InvestingPro Tips highlight that Axalta is trading near its 52-week high, with a significant 33.76% return over the past year. This performance supports RBC Capital's decision to maintain its Outperform rating. Additionally, the company's management has been aggressively buying back shares, which could indicate confidence in future performance and align with the positive free cash flow growth mentioned in the article.
The company's profitability is underscored by an EBITDA of $1.06 billion for the last twelve months as of Q3 2024, with an impressive EBITDA growth of 27.75%. This strong financial performance corroborates RBC Capital's raised EBITDA estimates and price target.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for Axalta Coating Systems, providing deeper insights into the company's financial health and market position.
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