Seeing “positive momentum across the board,” Scotia’s Michael Doumet raised his ATS Corp. target to $71 from $67 with a “sector outperform” rating. The average is $70.
“ATS beat Street EBITDA in 11 of the last 12 Qs,” he said. “In each of those beats, sales exceeded Street expectations. 4QF23 was the same (but more pronounced). Sales topped consensus by 10 per cent, driven by strong program execution. Cumulative organic growth in the last two fiscal years come out to more than 30 per cent and the revenue guide for 1QF24 implies organic growth of 12 per cent at the mid-point, showing continued pace. Despite strong program execution, backlog remains at a record, with what we believe to be a healthy pipeline of opportunities in Life Sciences, Transportation (potential new EV wins with existing and new OEMs), and other areas. Further, we expect easing supply chains, the benefits of the recent restructuring, and operating leverage to gradually provide margin tailwinds in the NTM [next 12 months].
“Despite the recent strong share price performance, we see several reasons to remain bullish. ATS continues to benefit from secular and structural growth drivers; we expect Life Sciences and Transportation to drive upside versus our/consensus estimates. ATS shares trade at 14.4 times EV/EBITDA, below its Industrial Technology peer average (17.9 times) and E&C peer average (15.5 times).”