On Thursday, BMO Capital Markets maintained its Outperform rating on shares of Axalta Coating Systems (NYSE:AXTA) and increased the price target to $46.00 from the previous $45.00. The firm's optimism is based on Axalta's performance, which has been exceeding its market sectors, driven by successful cost and efficiency initiatives, new business wins, and strong free cash flow (FCF).
According to BMO Capital Markets, Axalta is experiencing an impressive 35-40% plus earnings per share (EPS) growth. The company's ongoing Transformative & Network Optimization programs are expected to continue delivering cost savings.
Moreover, Axalta's shift towards prioritizing top-line growth, having already achieved its long-term margin goals, is anticipated to sustain robust double-digit EPS growth and record returns on capital employed (ROCE) in the forthcoming years.
The analyst from BMO Capital Markets highlighted that Axalta's strategic efforts should propel the stock towards the mid to upper $40 range. With the fundamentals in place and the potential for modest multiple expansion, the firm reaffirms Axalta as a top small to mid-cap (SMID) stock selection.
Axalta Coating Systems is recognized for its leadership in the coatings industry, providing a wide range of liquid and powder coatings to customers in various markets, including automotive, industrial, and transportation. The company's commitment to innovation and performance has been instrumental in its financial success and market position.
In other recent news, Axalta Coating Systems has reported record net sales of $1.32 billion during its Third Quarter 2024 Earnings Call, marking a 15th consecutive quarter of year-over-year growth.
The company has also 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 has been identified as a significant growth driver, particularly in the refinish business.
Despite a projected 2-3% decline in body shop wins, Axalta remains confident in its growth strategies. The company plans a balanced capital deployment approach between share buybacks and M&A opportunities. Moreover, the company expects raw material costs to stabilize in Q4 and into 2025, with anticipated inflation of 2-3%.
Axalta has also reported regional shifts, such as new customer acquisitions in Latin America and Mexico, as part of its strategy. The management anticipates continued upside in margins into 2025 and 2026, particularly due to a projected increase in commercial vehicle production ahead of 2027 emissions changes. These are all recent developments that have shaped the company's trajectory.
InvestingPro Insights
Axalta Coating Systems' strong performance, as noted by BMO Capital Markets, is further supported by recent InvestingPro data. 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 growth rate of 3.91%, aligning with the analyst's positive outlook on the company's top-line focus.
InvestingPro Tips highlight Axalta's financial strength and market performance. The company has a perfect Piotroski Score of 9, indicating robust financial health. This score supports BMO's assessment of Axalta's successful cost and efficiency initiatives. Moreover, Axalta is trading near its 52-week high, with a significant 46.09% price return over the past year, reinforcing the stock's strong momentum mentioned in the article.
The company's profitability is evident from its operating income margin of 13.84% and EBITDA growth of 23.36% over the last twelve months. These metrics underscore Axalta's ability to generate strong cash flows, as emphasized in BMO's analysis.
For investors seeking more comprehensive insights, InvestingPro offers 11 additional tips for Axalta Coating Systems, providing a deeper understanding of the company's financial position and market dynamics.
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