MTS Systems Initiated Overweight By JPMorgan
MTS Systems Corporation (NASDAQ: MTSC) shares have plummeted 30 percent year-to-date. JPMorgan’s Paul Coster initiated coverage of the company with an Overweight rating and a price target of $54. The analyst believes the company’s stock is currently undervalued, given the prospects of 2H and long-term margin expansion.
MTS Systems’ shares have recently been under pressure due to recent execution challenges and the debt burden associated with the PCB acquisition. Analyst Paul Coster said, however, that the company’s margins were poised to expand in 2H, while there could be an upward revision of the long-term growth and margin prospects.
Margin Expansion In 2H
Coster expects the Test segment’s revenue and margin to reaccelerate in the back half of the year. He wrote, “Based on two years of strong bookings, record segment backlog, and the recent addition of resources necessary to execute, we expect custom projects to conclude in 2H, unleashing 5-10% y/y revenue growth and higher EBITDA margins.”
Upward revision Of LT Prospects
The successful integration of the PCB acquisition is likely to boost sensor growth and be margin accretive. While PCB should benefit from MTS Systems’ global reach and Test market cross-selling, MTS Systems would benefit from scale and synergies. “Combined with MTS, PCB should yield a significant increase in MTS’s EBITDA margin by FY18,” the analyst added.
Latest Ratings for MTSC
|Aug 2016||Wells Fargo||Initiates Coverage on||Market Perform|
|Jun 2016||JP Morgan||Initiates Coverage on||Overweight|
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