Citi has updated its view on Axalta Coating Systems (NYSE: NYSE:AXTA), increasing the price target to $42 from the previous $40, while reiterating a Buy rating on the stock.
The firm's assessment followed key takeaways from a recent earnings call, which highlighted several positive developments within the company's operations.
Axalta's Industrial business segment was noted for its significant sequential margin improvement. The company has achieved solid new wins and has strategically shifted away from low-margin business.
This move has positioned Axalta to potentially benefit from future enhancements in construction or residential markets, especially after reporting strong growth in the second quarter of 2024.
The company's outlook for the second half of 2024 suggests a temporary moderation in Commercial Vehicle performance, with expectations set for a rebound in 2025. This anticipation is in preparation for a pre-buy phase leading up to 2026.
Axalta also reported that Class 8 production in North America exceeded expectations in the second quarter, and the Latin American market is projected to remain robust.
Additionally, Axalta has forecasted that its new product, CoverFlexx, will contribute approximately $40 million to the company's total revenue in the latter half of 2024. The company indicated that the Performance Coatings EBITDA margin of 25% seen in the second quarter should be considered a reasonable indicator for CoverFlexx margins moving forward.
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