On Monday, Deutsche Bank (ETR:DBKGn) adjusted its stance on Dana Holding (NYSE: NYSE:DAN), upgrading the stock from Hold to Buy and significantly increasing the price target to $19.00 from the previous $9.00. The revision follows Dana's announcement of the divestiture of its Off-highway business, which is expected to provide substantial cash for debt reduction and possibly returning capital to shareholders soon.
The stock has shown strong momentum, gaining nearly 10% in the past week, according to InvestingPro data, which also reveals the company has maintained dividend payments for 13 consecutive years.
The sale of the Off-highway segment is anticipated to fetch around $2.5 billion, based on an estimated 6x EBITDA multiple. These proceeds are intended for debt repayment, which could significantly improve the company's current debt-to-equity ratio of 2.02x.
Moreover, Dana has unveiled a $200 million cost reduction plan aimed at preserving its EBITDA margin between 8-8.5%, despite the expected dilution of company-wide margins from the divestiture.
The cost-saving measures are slated to be partially realized in 2025, with the remainder expected in 2026. Deutsche Bank's analysis suggests that these strategic moves will strengthen Dana's financial position. The bank's optimistic outlook is reflected in the doubled price target, which is now based on a 4.5x Pro Forma 2025 EBITDA multiple.
Dana Holding's strategic decisions, including the divestiture and cost-cutting initiatives, are seen as pivotal steps towards improving the company's balance sheet and enhancing shareholder value. With these actions, Deutsche Bank foresees a higher potential upside for Dana's stock, prompting the upgrade to a Buy rating.
In other recent news, Dana Holding Corporation has seen significant developments. Barclays (LON:BARC) has upgraded Dana's stock from Equalweight to Overweight, citing undervaluation and an improving outlook. This comes despite Dana's EBITDA growth not meeting market expectations, with projections for 2024 now falling short of $900 million.
Recent leadership changes have also taken place at Dana, with R. Bruce McDonald appointed as the new Chairman and CEO. Furthermore, the company is planning to sell its Off-Highway business, a move aimed at streamlining operations and focusing on light and commercial vehicle markets. Dana is also launching a $200 million cost reduction plan, targeting a reduction in selling, general, and administrative costs.
Despite these strategic shifts, Dana reaffirms its full-year 2024 guidance, with sales projected between $10.2 and $10.4 billion, adjusted EBITDA of $855 to $895 million, and free cash flow of $90 to $110 million. In Q3, Dana reported revenue of $2.476 billion, falling short of the Bloomberg consensus but surpassing the consensus for adjusted EBITDA at $232 million.
Finally, JPMorgan (NYSE:JPM) has adjusted its financial outlook for Dana, reducing the price target but maintaining an Overweight rating on the stock. These recent developments highlight Dana's focus on operational efficiency and cost management amidst challenging market conditions.
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