On Wednesday, Baird maintained its Outperform rating on shares of Atmus Filtration Technologies (NYSE:ATMU) and increased the price target to $42.00, up from the previous $37.00. The firm cited a combination of factors, including industry freight trends and the company's market performance, as reasons behind the adjustment.
The report noted that shipping data from September showed a slowdown in freight trends throughout the third quarter, despite a stronger-than-expected start in July. While definitive signs of a freight recovery were not evident, the potential for a cyclical upturn in 2025 remains a consideration for the industry.
Despite the lack of clear signals for a broad freight market recovery in the second half of 2024, Baird suggested that Atmus Filtration's early third-quarter freight strength and momentum in market share gains could result in sales outperforming expectations for the quarter.
However, the analyst also pointed out that the company's outlook for the rest of the year might remain conservative, taking into account the typically weaker fourth quarter and a slowdown in aftermarket and freight forwarding activities.
Atmus Filtration's stock performance in the third quarter, which saw a 30% increase compared to the S&P 500's 5% rise, was also highlighted as a factor in the decision to raise the price target. The new target of $42.00 is based on an 11 times multiple of the company's projected CY25 earnings, reflecting an expansion in market multiples.
In other recent news, Atmus Filtration Technologies reported strong results for the second quarter, including a 5% increase in sales, totaling $433 million. The company's adjusted EBITDA rose to $93 million, up from the previous year's $80 million, with an adjusted earnings per share of $0.71. Atmus also launched a capital return program, including a quarterly dividend and a share repurchase program.
Financial services firm Baird raised its price target for Atmus Filtration shares to $37.00, citing the company's market share gains and consistent strong execution. The increase in the price target followed Atmus Filtration's sales and margin beat in the second quarter. The company's recent performance was noted as significant, especially given its relatively recent status as a publicly traded entity.
Despite challenging aftermarket conditions, Atmus's strategic growth initiatives have positioned it for continued progress. The company expects global aftermarket revenue to remain flat or increase by up to 5% and has raised first-fit market revenue guidance to a range of flat to up 3%. At the end of the second quarter, Atmus reported $161 million in cash and a net debt to adjusted EBITDA ratio of 1.4 times.
InvestingPro Insights
Atmus Filtration Technologies' strong market performance, as noted by Baird, is further supported by recent InvestingPro data. The company's stock has shown impressive returns, with a 25.92% price total return over the last three months and a substantial 88.12% return over the past year. This aligns with Baird's observation of the stock's 30% increase in the third quarter.
InvestingPro Tips highlight that Atmus is trading near its 52-week high, with the current price at 97.9% of its peak. This reinforces the positive sentiment expressed in Baird's analysis. Additionally, the company's profitability over the last twelve months and analysts' predictions of profitability this year support the optimistic outlook.
The company's P/E ratio of 16.51 (adjusted for the last twelve months as of Q2 2024) suggests a moderate valuation, which could be attractive to investors considering the strong growth trajectory. With a market cap of $3.26 billion and revenue of $1.66 billion for the last twelve months, Atmus demonstrates a solid financial foundation.
For investors seeking more comprehensive analysis, InvestingPro offers 7 additional tips for Atmus Filtration Technologies, providing deeper insights into the company's financial health and market position.
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