On Wednesday, BMO Capital adjusted its outlook on Altus Group (TSX:AIF:CN) (OTC: ASGTF) shares, increasing the price target to Cdn$59.00 from the previous Cdn$51.00, while keeping a Market Perform rating on the stock. The revision follows the announcement by Altus Group of the sale of its Property Tax business to Ryan, LLC for $700 million.
The disposal of the Property Tax segment is seen as a step that will enable Altus to concentrate more on its Analytics division, which is characterized by higher growth and profit margins. This strategic move is also expected to give the company room to reduce debt and potentially return more cash to its shareholders.
In light of the recent transaction, BMO Capital has updated its financial forecasts for Altus Group. The firm reiterated its 2024 earnings guidance and introduced pro forma targets for 2026, which include high single-digit (HSD) consolidated revenue growth and consolidated adjusted EBITDA margins ranging between 24-26%, with the Analytics business aiming for double-digit (DD) growth and approximately 35% margins.
Adjustments were also made to the 2025 earnings estimates to account for the impact of the Property Tax business sale, which is anticipated to occur in the first half of 2025. The new price target of Cdn$59 is based on an updated sum-of-the-parts (SOTP) valuation, reflecting a balanced risk-reward scenario according to BMO Capital.
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