ATS Corp T.ATS

TD

[retiredcf]

Have a $63.00 target. GLTA

Q1/F25 PREVIEW; BOOKINGS, F2025 EARNINGS VISIBILITY ARE FOCUS AREAS

THE TD COWEN INSIGHT

ATS' share price is down >25% YTD and the valuation is ~in line with historical norms. Q1/ F25 bookings are inherently unpredictable, but ATS offers leverage to many favourable secular trends (supply-chain de-risking, etc.), and is largely exposed to end-markets with high barriers to entry/lower cyclicality (EV work is only ~25% of backlog). As such, we believe the risk/reward is skewed positively.

Event

ATS will report Q1/F25 results on Thursday, August 8 (pre-market).

Impact: NEUTRAL

Key Data

Q1/F25 Results: We have trimmed our Q1/F25 earnings forecasts. Our revised revenue forecast of $708mm is ~1% above consensus ($702mm), while our revised EBITDA estimate of $104mm is ~2% below consensus ($106mm).

Consensus Bookings Estimate Below TTM Bookings: Bookings/backlog are the most important forward-looking indicators for ATS, in our view, particularly this quarter,
given that the lack of expected H1/F25 earnings growth is one of the key reasons that investors see no rush to step into the stock. The consensus bookings estimate is $706mm (book-to-bill ratio of ~1.0x), which is below the TTM average of $723mm, and therefore, looks potentially conservative. We have tweaked our own Street-high bookings estimate to $790mm from $810mm, which may still prove optimistic, but is grounded in the assumption that ATS can duplicate its Q4/F24 bookings of $791mm, based on the recent strength in the business ex-EVs, and a deliberate push to reallocate the company's resources to non-EV markets. The TTM book-to-bill ratio is 1.12x, excluding EVs, which implies considerable ongoing strength in the other verticals, most notably life sciences, food and beverage, and energy.

M&A Still a Potential Catalyst: ATS' Q4/F24 leverage was 2.6x TTM EBITDA (pro forma the Paxiom acquisition), and we believe the Street would tolerate another ~0.5x turn for the right opportunity, which implies ~$240mm of firepower: enough to acquire ~$24mm- $30mm of EBITDA at an 8x-10x multiple (pre-synergies) or ~5-7% of F2025E EBITDA (consensus).

Valuation Reasonable: ATS is trading at 11.8x EV/F2025E EBITDA (consensus), which is marginally below its five-year average multiple of 12.0x, and only slightly above its 10- year average multiple of 11.4x. We believe that multiple expansion beyond the historical range is justified, because the resiliency and growth potential of the business have meaningfully and sustainably improved over the past five years