Seaport Global Downgrades Franklin Electric
Seaport Global has downgraded Franklin Electric Co. (NASDAQ: FELE) to Neutral from Accumulate as shares are nearing its price target of $36, which remains unchanged.
"As FELE hits easier comparisons in its Water Systems segment, we anticipate mid-single-digit organic growth during the remainder of 2016 and in 2017. We remain optimistic about a recovery in agricultural spending, though it still appears to be a distant catalyst," analyst Ryan Cassil wrote in a note.
The analyst said Franklin Electric, which makes water and fuel pumping systems, has been recouping 200 bps-300 bps of pricing it gave up through a combination of mix and the distributor reset.
Meanwhile, Cassil still expects Fueling Systems segment to benefit from mid-single-digit growth, helped by balance of developed replacement and emerging market new construction growth with modest margin expansion.
Ultimately, the analyst forecast margins in the segment to revert to the low 20s in 2018 after several years of demand driven expansion in the mid-20s. Cassil sees 2016 adjusted EPS of $1.64 on revenue of $938.1 million.
"We continue to believe FELE will pursue bolt-on acquisitions in the future and that it has significant opportunity to reduce its working capital needs, though we expect no major change in the near-future," Cassil added.
At time of writing, shares of Franklin Electric fell 3.21 percent to $32.90.
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