Forgent Power Solutions jumps as Bernstein sees massive earnings upside

Investing.com -- Forgent Power Solutions Inc (NYSE: FPS) stock rallied 6.1% in Friday trading following a bullish initiation from Bernstein SocGen Group, which tagged the electrical OEM with an Outperform rating and a $48 price target. The firm underscored that FPS is currently trading at a steep discount to its peers, arguing that public markets have yet to price in three structural earnings drivers set to unlock substantial shareholder value.

At the core of the constructive thesis is a projected earnings-per-share compound annual growth rate of 70% through 2030, outstripping Wall Street's consensus estimate of roughly 60%. Analyst Chad Dillard highlighted that upcoming positive earnings revisions will serve as the primary catalyst to bridge the company's existing valuation gap against the broader sector.

Dillard noted that FPS stands particularly well-positioned as a pure-play provider, deriving approximately 80% of its revenue from data centers and the electrical grid. This targeted exposure coincides with increasingly protectionist trade policy, which has significantly elevated the strategic value of domestic manufacturing capacity in North America.

The secular shift toward modular data center construction, expected to expand from 40% of the market today to 60% by 2030, serves as another powerful operational tailwind. By transitioning from selling discrete components to offering fully integrated systems, FPS expands its content opportunity by 55% to $2.8 million per megawatt.

To capture this higher-margin demand, management has reorganized the business by revamping its go-to-market strategy, bolstering front-end engineering, and scaling modular production footprint. Complementing these operational changes, the company maintains product lead times 30% to 50% below industry averages, yielding a critical competitive edge when deployment speed directly impacts customer revenue generation.

This superior turnaround time is underpinned by available manufacturing capacity, custom design capabilities that bypass supply chain bottlenecks, and a high degree of vertical integration. Dillard noted that these structural advantages have enabled FPS to capture a 7% market share among non-hyperscalers compared to its 4% overall market share, while a recent first-time hyperscaler win opens an additional avenue for long-term growth.

Looking out toward 2030, financial metrics are expected to strengthen considerably as higher factory utilization, SG&A leverage, and a richer mix of modular revenue take effect. Together, these operational efficiencies are expected to lift the company's EBITDA margin by 500 basis points to reach 28%, according to Dillard.

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