On Thursday, BMO Capital Markets maintained its positive stance on shares of Axalta Coating Systems (NYSE:AXTA), raising the stock's price target to $46 from the previous $45, while keeping the Outperform rating intact.
The firm's analyst highlighted Axalta's performance, noting that the company is significantly outperforming its end-markets. This success is attributed to effective cost and efficiency initiatives, securing new business, and generating robust free cash flow, which is expected to drive an impressive 35-40% plus earnings per share (EPS) growth.
The analyst praised Axalta's ongoing Transformative & Network (LON:NETW) Optimization initiatives, which are anticipated to continue delivering cost savings. Alongside these cost reductions, the company's sharpened focus on increasing its top-line growth is noteworthy, especially given that it has already achieved its long-term margin targets.
These factors are projected to support sustained double-digit EPS growth and record return on capital employed (ROCE) in the forthcoming years.
BMO Capital Markets expressed confidence in Axalta's future performance, suggesting that the combination of the company's solid earnings growth and potential for modest multiple expansion could propel the stock price into the mid to upper $40 range. The analyst's outlook is firmly optimistic, as Axalta is expected to maintain strong growth momentum and financial performance.
In conclusion, BMO Capital Markets reiterated its Outperform rating, positioning Axalta Coating Systems as a top small to mid-cap (SMID) stock selection. The firm's analysis indicates that Axalta's strategic initiatives and financial results make it a standout choice in its sector.
In other recent news, Axalta Coating Systems has been making significant strides. The company reported record net sales of $1.32 billion in 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 was noted as a key growth driver, particularly in the refinish business.
In addition, BMO Capital Markets maintained its Outperform rating on Axalta and raised the price target to $46.00, citing the company's strong performance, successful cost and efficiency initiatives, new business wins, and robust free cash flow. The firm also noted that Axalta's strategic efforts should propel the stock towards the mid to upper $40 range.
These recent developments highlight Axalta's commitment to growth and efficiency, as well as its success in navigating market challenges. Despite a projected 2-3% decline in body shop wins, Axalta remains optimistic about its growth strategies and potential market opportunities. The company's ongoing transformation initiatives have strengthened its infrastructure, positioning it for future growth.
InvestingPro Insights
Axalta Coating Systems' (NYSE:AXTA) strong performance, as highlighted by BMO Capital Markets, is further supported by recent data from InvestingPro. The company's market capitalization stands at $8.35 billion, reflecting its significant presence in the coatings industry. Axalta's revenue for the last twelve months as of Q2 2024 reached $5.25 billion, with a modest growth of 3.91% over the same period.
InvestingPro Tips reveal that Axalta has been aggressively buying back shares, which aligns with the company's focus on delivering value to shareholders and potentially contributing to the impressive EPS growth mentioned in the analyst report. Moreover, the stock is trading near its 52-week high, with a price that's 98.84% of its peak, indicating strong market confidence in Axalta's performance and outlook.
The company's profitability is underscored by its positive earnings over the last twelve months, supporting BMO's projection of sustained double-digit EPS growth. Axalta's P/E ratio of 23.78 and adjusted P/E ratio of 22.23 for the last twelve months as of Q2 2024 suggest that while the stock isn't cheap, it may still offer value considering the projected earnings growth.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights. Currently, there are 11 additional InvestingPro Tips available for Axalta Coating Systems, providing a deeper understanding of the company's financial health and market position.
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