Methode Electronics (MEI): New Initiatives Overshadow Weak Guidance - FBR Capital

FBR Capital analyst, Christopher Van Horn, maintained his Outperform rating after Methode Electronics (NYSE: MEI) reported F4Q16 results on June 23. He was pleasantly surprised to see shares trade up 6% despite FY17 guidance that came in short of consensus.

The analyst believes two main themes are moving the stock and should continue to take it higher. The company announced significant new automotive business, including all-new shift-by-wire work with an existing customer, additional business with Ford that could back-fill sun-setting Ford MyTouch console revenues, and two new e-Bike torque sensor programs. Management also noted that Dabir Surface has now been used in more than 3,000 procedures and should ramp in revenue during FY18; we continue to believe Dabir could be a $200 million piece of business (or potentially more).

MEI has a very substantial cash balance of $228 million, is in a position to continue delivering cash to shareholders or to pursue a bolt-on technology acquisition. Overall, the thesis remains intact: This stock should track higher based simply on wins in automotive and greater clarity on Dabir; headwinds in power products and interfaces are priced into shares.

No change to Outperform rating or $42 price target.

For an analyst ratings summary and ratings history on Methode Electronics click here. For more ratings news on Methode Electronics click here.

Shares of Methode Electronics closed at $31.98 yesterday.

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