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On Wednesday, KeyBanc has adjusted its outlook on Myers Industries (NYSE:MYE), a company known for its Storage, Handling & Protection (SHP) products, by reducing the price target to $22 from the previous $27 while keeping an Overweight rating on the stock. The adjustment comes after a visit to the company's Akro-Mils Facility in Wadsworth, Ohio, which is a key contributor to Myers Industries' revenue and boasts EBIT margins exceeding the Material Handling (MH) segment's average of 17.1% in FY23, excluding the Signature acquisition.
The Akro-Mils brand, recognized for its storage solutions like Kanban bins, large containers, and shelving systems, as well as material handling products such as dollies, carts, and hand trucks, is highlighted as a significant part of Myers Industries' business. Analysts believe that the company's earnings potential remains underappreciated given the growth potential within its SHP subsegment, the strategy for debt repayment, and the prospects of future acquisitions.
However, the recent unexpected CEO announcement on September 9th has introduced a degree of uncertainty that prompted the revision of the company's price target. Despite this, there is no indication that Myers Industries will deviate significantly from its merger and acquisition-focused growth strategy. The firm is awaiting further clarity on the long-term CEO decision before considering any further positive adjustments.
KeyBanc suggests that a strong CEO appointment, a recovery in Myers Industries' core end markets such as RV, Marine, and Consumer, and clear signs of improvement or a definitive exit strategy for its Distribution business could serve as catalysts for a more favorable view of the company's stock in the future.
In other recent news, Myers Industries has undergone significant leadership changes and reported robust Q2 financial results despite a soft demand. Dave Basque has been appointed as Interim President and CEO following the departure of former CEO Mike McGaugh. This change comes alongside Jeff Baker's appointment as President of the Distribution Segment, effective October 1, 2024, as Jim Gurnee steps down.
Despite a decrease in organic sales, Myers Industries reported strong Q2 performance, largely attributed to the integration of Signature Systems. This integration led to growth in key financial margins and the implementation of cost-saving initiatives, expecting to realize between $7-9 million in annual savings and $8 million in cost synergies by 2025.
However, due to softer demand and macroeconomic challenges, Myers Industries has revised its full-year guidance, now forecasting net sales growth of 5% to 10%, and adjusted earnings per diluted share of $1.05 to $1.20. Despite a 6.3% drop in organic sales, the Material Handling segment saw a 39% increase in adjusted EBITDA due to the Signature acquisition.
The company is also planning to close three distribution centers and consolidate its Iowa facility, targeting $5 million in annualized cost savings. Myers Industries is focusing on long-term growth, identifying potential opportunities in the infrastructure and military sectors. The company expects the Scepter military business to grow to approximately $40 million by 2025.
InvestingPro Insights
Recent InvestingPro data provides additional context to KeyBanc's analysis of Myers Industries (NYSE:MYE). The company's market capitalization stands at $467.88 million, with a P/E ratio of 12.35 based on the last twelve months as of Q2 2024. This relatively low P/E ratio, combined with a dividend yield of 4.31%, suggests that the stock might be undervalued, aligning with KeyBanc's Overweight rating.
InvestingPro Tips highlight that Myers Industries has maintained dividend payments for 53 consecutive years, demonstrating a strong commitment to shareholder returns. This consistency is particularly noteworthy given the recent market challenges, as evidenced by the stock's 42.87% price decline over the past six months.
The company's financial health appears solid, with a revenue of $816.21 million in the last twelve months as of Q2 2024, and an operating income margin of 8.6%. These figures support KeyBanc's view on the company's earnings potential and growth prospects in the Storage, Handling & Protection subsegment.
Investors seeking a more comprehensive analysis can find 7 additional InvestingPro Tips for Myers Industries, offering deeper insights into the company's financial position and market performance.
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