- KeyBanc analyst Steve Barger lowered the price target on Federal Signal Corp (NYSE:FSS) to $48 (an upside of 37.5%) from $55 and maintained an Overweight rating on the shares.
- The analyst mentions the shares declined following the company’s Q4 results and 2022 guidance. He believes the decline was driven by the EPS guide of $1.76-$2.00 versus a consensus of $2.14.
- Barger estimates the guide implies a mid-teen percent incremental margin despite a fairly robust revenue outlook, driven by supply chain and labor challenges in the first half of 2022.
- While these dynamics are not unique to Federal Signal, the lower conversion is disappointing relative to its record backlog, states Barger.
- Raymond James analyst Felix Boeschen lowered the price target to $46 (an upside of 32%) from $52 and maintained a Strong Buy rating on the shares.
- Recently, the company reported fourth-quarter sales growth of 2% year-over-year to $301.4 million, marginally missing the consensus of $301.67 million.
- Adjusted EPS was $0.40, beating the consensus of $0.38.
- Orders for the quarter were $444 million, up by 61% Y/Y. Backlog stood at $629 million, up 107% Y/Y.
- Adjusted EBITDA margin declined to 13.3% for the quarter, from 15.9% a year ago.
- As of December 31, 2021, total debt was $283 million, total cash and equivalents were $41 million, and the company had $209 million of availability for borrowings under its credit facility.
- FY22 Outlook: The company expects net sales of $1.35 billion - $1.45 billion versus the consensus of $1.39 billion and adjusted EPS of $1.76 - $2.00 versus the consensus of $2.14.
- Price Action: FSS shares are trading higher by 3.71% at $34.90 on the last check Wednesday.
