Benchmark initiates LCI Industries stock coverage with buy rating

On Thursday, Benchmark initiated coverage on shares of LCI Industries (NYSE:LCII), assigning a Buy rating and setting a price target of $130.00. The firm's analysis suggests that LCI Industries is capable of achieving approximately $8 in earnings per share and over $400 million in EBITDA at its current scale with modest assumptions.

The valuation of LCI Industries by Benchmark is grounded in an earnings discount cash flow (DCF) model, which applies a terminal price-to-earnings (P/E) multiple of around 13 times. This multiple is below the company's ten-year average of 15 times.

While the firm acknowledges that at 9 times next twelve months (NTM) enterprise value to EBITDA and 15 times P/E, the stock seems fully valued, they believe the company's growth initiatives, tailwinds, and potential for profitability reversion present a positive story that is currently underestimated by the market.

Benchmark highlights LCI Industries' stable operating model as a key factor in its valuation. The company's consistent strong return on invested capital (ROIC), with a 20-year average of approximately 15%, reinforces the firm's confidence in LCI's strategic playbook.

Additionally, the analyst points out that LCI's dividend yield, which is over 4%, is historically attractive, offering a compelling case for investors seeking income alongside potential capital appreciation.

The $130.00 price target reflects the firm's conviction in LCI's ability to execute on its strategic initiatives and deliver shareholder value. Benchmark's coverage initiation is based on the company's solid financial performance and the attractive prospects it sees going forward.

In other recent news, LCI Industries announced a regular dividend of $1.05 per share, payable to shareholders on record as of May 31, 2024. This development follows the company's strong financial performance in the first quarter of 2024, with revenue climbing to $968 million, a 16% increase from the previous quarter.

Despite a slight dip in consolidated net sales, the company reported an operating profit of $58 million and a substantial rise in net income to $36.5 million. In addition, LCI Industries saw its price target increase from $100 to $103, with a maintained Neutral rating, following the robust Q1 earnings report. The company's aftermarket segment and cost-efficiency measures have been significant contributors to these positive financial results.

InvestingPro Insights

In light of Benchmark's optimistic outlook on LCI Industries (NYSE:LCII), recent data from InvestingPro provides additional context. With a market capitalization of $2.94 billion, LCI Industries is trading at a P/E ratio of 31.16, reflecting a premium compared to the industry average. This could be justified by the company's consistent performance, as evidenced by a robust shareholder yield and a track record of raising its dividend for 7 consecutive years, indicating a commitment to returning value to shareholders.

InvestingPro Tips highlight LCI Industries' ability to maintain dividend payments for a decade and the anticipation of net income growth this year, which may be factors contributing to the company's significant return over the last month of 14.46%. These insights suggest that investors might be recognizing the company's potential for sustained profitability, as also reflected in the solid 3.63% dividend yield.

For investors seeking a more comprehensive analysis, InvestingPro offers additional tips on LCI Industries, which can be accessed through their platform. Using the exclusive coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking valuable insights that could further inform investment decisions. There are 9 more InvestingPro Tips available that delve deeper into the financial health and future prospects of LCI Industries.

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