Analysts Cut Federal Signal Price Target Post Q4 Results - Federal Signal (NYSE:FSS)

KeyBanc analyst Steve Barger lowered the price target on Federal Signal Corp FSS to $48 (an upside of 37.5%) from $55 and maintained an Overweight rating on the shares.
The analyst mentions the shares declined following the company’s Q4 results and 2022 guidance. He believes the decline was driven by the EPS guide of $1.76-$2.00 versus a consensus of $2.14.
Barger estimates the guide implies a mid-teen percent incremental margin despite a fairly robust revenue outlook, driven by supply chain and labor challenges in the first half of 2022.
While these dynamics are not unique to Federal Signal, the lower conversion is disappointing relative to its record backlog, states Barger.
Raymond James analyst Felix Boeschen lowered the price target to $46 (an upside of 32%) from $52 and maintained a Strong Buy rating on the shares.
Recently, the company reported fourth-quarter sales growth of 2% year-over-year to $301.4 million, marginally missing the consensus of $301.67 million.
Adjusted EPS was $0.40, beating the consensus of $0.38.
Orders for the quarter were $444 million, up by 61% Y/Y. Backlog stood at $629 million, up 107% Y/Y.
Adjusted EBITDA margin declined to 13.3% for the quarter, from 15.9% a year ago.
As of December 31, 2021, total debt was $283 million, total cash and equivalents were $41 million, and the company had $209 million of availability for borrowings under its credit facility.
FY22 Outlook: The company expects net sales of $1.35 billion - $1.45 billion versus the consensus of $1.39 billion and adjusted EPS of $1.76 - $2.00 versus the consensus of $2.14.
Price Action: FSS shares are trading higher by 3.71% at $34.90 on the last check Wednesday.

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