On Wednesday, Benchmark analyst increased the stock price target for Standex International (NYSE: NYSE:SXI) to $250 from the previous $210, while maintaining a Buy rating on the stock.
Standex International reported its second-quarter fiscal year 2025 results and concurrently announced the strategic acquisition of Amran Instrument Transformers and Narayan Powertech. These companies are recognized as leading manufacturers of instrument transformers, which are essential components for the electric grid.
The acquisition, valued at $462 million, significantly enhances Standex International's market position. Amran/Narayan Group boasts revenues of around $100 million, showcasing a robust growth rate of 30%.
The group's EBITDA margins stand at an impressive 40%, which is double that of Standex International's current margins. The addition of these entities to Standex's portfolio is expected to be immediately accretive, doubling the company's exposure to rapidly growing markets to about 25%.
The transaction was financed with over $400 million in cash, utilizing a $250 million 354-day term loan and $55 million in equity. Despite the reported end market weakness in the quarterly results, there are indications of a strong recovery in the second half of the fiscal year. The acquisition is anticipated to significantly enhance Standex's margins and contribute to the expected recovery.
Given the strength of the acquisition and the potential margin enhancement for Standex International, as well as the forecasted second-half recovery, Benchmark has decided to raise the target price. The firm reiterates its Buy rating, signaling confidence in the company's strategic direction and future performance.
In other recent news, Standex International has been in the spotlight due to its significant financial and corporate activities. The company has reported record profit and cash generation for fiscal 2024, despite a decrease in sales. Standex also made its largest acquisition to date, purchasing Amran/Narayan Group for $462 million. This acquisition is expected to significantly expand Standex's presence in the electrical grid market.
DA Davidson, an analyst firm, raised Standex's price target to $222.00 following this acquisition, maintaining a positive outlook for the company. Standex's shareholders approved an amendment granting the Board of Directors the authority to determine the number of directors within a set range, and the company's 2018 Omnibus Incentive Plan was amended to include 450,000 additional shares.
The company also increased its quarterly cash dividend by 6.7% to $0.32 per share, marking its 241st consecutive quarterly cash dividend. Standex's Engineering Technologies segment saw a 15.7% increase in revenue. The company reaffirmed its long-term financial outlook for fiscal year 2028, targeting high single-digit organic growth and improved profitability metrics.
These are recent developments from Standex International, which concluded its fiscal fourth quarter with $347 million in available liquidity and a net cash position of $5.3 million.
InvestingPro Insights
The recent acquisition and positive analyst outlook for Standex International (NYSE: SXI) are further supported by key financial metrics and insights from InvestingPro. The company's market capitalization stands at $2.17 billion, reflecting its substantial presence in the industry.
Standex's commitment to shareholder value is evident through its dividend history. According to InvestingPro Tips, the company has raised its dividend for 14 consecutive years and has maintained dividend payments for an impressive 54 consecutive years. This consistent dividend growth, coupled with a current dividend yield of 0.7%, underscores the company's financial stability and commitment to returning value to shareholders.
The company's financial health appears robust, with InvestingPro data showing that cash flows can sufficiently cover interest payments and liquid assets exceed short-term obligations. This financial strength positions Standex well to integrate its recent acquisitions and potentially pursue further growth opportunities.
Despite a slight revenue decline of 2.75% in the last twelve months, Standex maintains a healthy gross profit margin of 39.13% and an operating income margin of 15.58%. These margins, combined with the expected margin enhancement from the Amran/Narayan Group acquisition, suggest potential for improved profitability in the coming quarters.
Investors considering Standex may find additional value in exploring the full range of InvestingPro Tips, which offers 9 more tips to further inform investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.