Citi, Deutsche Bank upgrade 'well-positioned' Axalta Coating Systems (AXTA)

Wall Street analysts are eyeing Axalta Coating Systems (NYSE: AXTA), with the stock upgraded to Buy at Deutsche Bank and Citi on Monday.

Deutsche Bank analyst David Begleiter upped the firm's price target on the stock to $40 from $25, telling investors the company's valuation discount is no longer warranted.

"With new customer wins in Refinish and Light Vehicle (~80% of '23E EBITDA) driving above market volume growth into '24, a closing of the price / cost gap driving significant earnings improvement in Mobility (Light Vehicle and Commercial Vehicle) and substantially less building and construction exposure than peers, Axalta is well positioned to be the best performing coatings company in '23," argues Begleiter.

The Deutsche Bank analyst went on to add that the potential upside in Axalta's shares to closing the valuation gap versus PPG is "substantial with every 1x of EBITDA = $4/shr, or 14% of the current share price."

At Citi, P.J. Juvekar lifted the firm's price target on the stock to $35.19 from $30.29 per share.

Juvekar said the upgrade follows the company's solid fourth-quarter report and its view that there is further upside ahead.

Citi's thesis is based on three points: "(1) AXTA has under-executed other coatings companies as margins in its Mobility coatings are near breakeven, while competitor PPG is at ~13%. We think AXTA has many underperforming legacy contracts," said Juvekar. "(2) New CEO Chris Villavarayan has been hired to fix the company, and while it's early, he seems rightly focused on getting pricing, while lowering the cost structure. Prior interim CEO Mr. Sachdev had already began focusing on costs. (3) AXTA reported a good quarter amid tough sledding in 4Q chemical earnings as its auto OEM & Refinish gained share."

Axalta shares rose 1% Monday.

By Sam Boughedda

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