What Makes Axalta Coating (AXTA) a Solid Choice Right Now

Axalta Coating Systems Ltd. AXTA registered a 6.7% rise in its stock value in the past three months thanks to robust first-quarter earnings that exceeded expectations.

Presenting an enticing investment opportunity with strong growth prospects, AXTA sports a Zacks Rank #1 (Strong Buy).

Earnings Outperformance

In the first quarter, Axalta Coating outperformed expectations, posting adjusted earnings of 48 cents per share, surpassing the Zacks Consensus Estimate of 40 cents. It pulled off a trailing four-quarter earnings surprise of around 7%, on average.

Robust Growth Prospects

The Zacks Consensus Estimate for AXTA's 2024 earnings is pegged at $1.99, indicating year-over-year growth of 26.8%. The consensus estimate for the current year experienced an upward revision of 6% in the past 60 days, underlining healthy growth potential. Moreover, earnings are expected to register a 45.7% rally in second-quarter 2024.

An Outperformer

AXTA’s shares are up 15.4% in a year against the industry’s fall of 9.7% in the same period.

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Strong Q1 Results & CoverFlexx Acquisition Instill optimism

In the first quarter, Axalta Coating reported robust performance, marked by a 37.1% year-over-year increase in adjusted earnings and a 0.8% year-over-year growth in sales, reaching $1.3 billion. Adjusted EBITDA rose significantly to $259 million from $213 million, with an adjusted EBIT margin of 20%, up by 340 basis points from the previous year.

The Performance Coatings segment’s net sales were flat, while its adjusted EBITDA increased 16% year over year to $196 million, achieving a margin of 23.1%. The Mobility Coatings segment recorded 2% growth in net sales, driven by strong volume growth in China. Despite modest headwinds from raw material indexed contracts, the price and product mix in Light Vehicle remained nearly flat. The segment's Adjusted EBITDA surged to $63 million, with an adjusted EBITDA margin of 14.2%, up by 410 basis points from the previous year.

Based on strong first-quarter results and the strategic actions to drive earnings, AXTA raised its full-year 2024 earnings and free cash flow outlook.

In addition to these strong financial results, Axalta announced an agreement to acquire The CoverFlexx Group from Transtar Holding Company for an initial cash payment of $285 million, with an additional $10-million earnout contingent on the business's 2024 performance. The acquisition, expected to close in the third quarter pending regulatory approval, will enhance Axalta's Refinish business by incorporating CoverFlexx's extensive range of automotive refinish and aftermarket coatings, including primers, basecoats, clearcoats and various detailing products. The CoverFlexx Group, which generated $78 million in revenues in 2023, employs over 120 people and operates facilities in Michigan and Ontario.

Axalta Coating Systems Ltd. Price and Consensus

 

Axalta Coating Systems Ltd. Price and Consensus

Axalta Coating Systems Ltd. price-consensus-chart | Axalta Coating Systems Ltd. Quote

 

Other Key Picks

Some other top-ranked stocks in the Basic Materials space are Carpenter Technology Corporation CRS and ATI Inc. ATI, eachsporting a Zacks Rank #1, and Ecolab Inc. ECL, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CRS’ earnings beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 15.1%. The company’s shares have soared 140.1% in the past year.

ATI’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, with the earnings surprise being 8.34%, on average. The stock has surged 68.6% in the past year.

The Zacks Consensus Estimate for Ecolab's current-year earnings is pegged at $6.59, indicating a year-over-year rise of 26.5%. The Zacks Consensus Estimate for ECL’s current-year earnings has moved up in the past 30 days. ECL beat the consensus estimate in each of the last four quarters, with the earnings surprise being 1.3%, on average. The stock has rallied nearly 35.2% in the past year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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