TSX:ATS - Post Discussion
Post by
retiredcf on Jan 25, 2024 8:53am
Scotia Capital
In a note titled The Best of Both Worlds (in the 2HF24), Scotia’s Michael Doumet raised his ATS Corp. target to $64 from $61, keeping a “sector outperform” rating. The average is $66.
“We are ahead of consensus for 3QF24 — and also expect upside to 4QF24 (i.e., we expect ATS’s 4QF24 revenue guidance [provided with 3Q results] will also be a positive surprise),” said Mr. Doumet. “In essence, what we expect in the next two quarters is the “best” from both Transportation and Life Sciences: Transportation sales should approach their near-term top (as revenue burn with its large customer reaches a high) and Life Sciences sales should rise from higher auto-injector contributions. Similar to last quarter, we think the risk is to the backlog, which we expect to moderate given the high revenue burn.
“ATS trades at 13.5 times on our F25E — expanding from 10.0x following its 2QF24 earnings release — and now trades closer to its three-year average. Since early November, 10-year rates have eased and the probability of an economic soft landing has increased, raising the prospects of continued healthy organic growth (despite slowing EV orders). Last quarter, ATS was also able to demonstrate an ability to backfill Transportation orders with Life Sciences (we think that is less likely in 3QF24).”
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