UBS Downgrades Axalta Coating Systems (AXTA) to Neutral

UBS analyst Joshua Spector downgraded Axalta Coating Systems (NYSE: AXTA) from Buy to Neutral with a price target of $35.00 (from $39.00).

The analyst comments: "We downgrade AXTA stock to Neutral from Buy and lower our PT to $35. Since the initial deal announcement with Akzo (link), AXTA shares are ~15% higher and we now see a more balanced risk/reward medium term. We think there are merits to the Akzo/AXTA deal as the cost savings could give both sides needed bottom line growth. However the cost savings may not be visible for for ~2 years and don't solve the challenge of minimal top line growth. AXTA's deal break fee is small (<$1/sh), but the more time that passes, it appears less likely we could get a competing bid. Since AXTA's CEO is exiting shortly after the deal close, there is a less clear strategy in a deal break scenario. In a completed deal scenario, AXTA's stock is linked with Akzo's which UBS rates Neutral, and based on current trading points to only ~3% upside for AXTA stock. In a break scenario AXTA would have cash immediately available to deploy but we think the stock could de-rate until investors get visibility on a longer term plan."

For an analyst ratings summary and ratings history on Axalta Coating Systems click here. For more ratings news on Axalta Coating Systems click here.

Shares of Axalta Coating Systems closed at $33.02 yesterday.

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