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KeyBanc's Bullish Thesis On Federal Signal Played Out As Expected

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KeyBanc's Bullish Thesis On Federal Signal Played Out As Expected

Shares of Federal Signal Corporation (NYSE: FSS) gained 17 percent Tuesday and hit a new all-time high of $28.32 in reaction to its second-quarter earnings report. This now puts an end to KeyBanc's year-long bullish stance on the stock.

The Analyst

KeyBanc Capital Markets' Steve Barger downgraded Federal Signal from Outperform to Sector Weight with no assigned price target (prior price target of $27).

The Thesis

Federal Signal, a provider of variety of emergency lighting, sirens and related products, reported a top-and-bottom-line earnings beat that pushed the stock north of KeyBanc's prior $27 price target, Barger said in a note. The company's solid execution since a revenue and operating margin trough in 2016 continued in the quarter and management deserves credit for managing growth since then.

Looking forward, Federal Signal's move into new markets and management's continued pursuit of accretive acquisitions should drive growth for the near-term, the analyst said. At the end of the day, however, the stock is up 72 percent since the firm turned bullish in May 2017 versus the S&P 500's 19 percent gain over the same time period. The stock is now trading at 18.1 times 2019 estimates, which implies a balanced risk/reward profile at current levels.

Price Action

Shares of Federal Signal were trading down 8 percent at $25.62 Wednesday afternoon.

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Earnings Scheduled For August 8, 2018

Latest Ratings for FSS

DateFirmActionFromTo
Dec 2020Raymond JamesInitiates Coverage OnMarket Perform
Dec 2020KeyBancUpgradesSector WeightOverweight
Jul 2020Colliers SecuritiesInitiates Coverage OnBuy

View More Analyst Ratings for FSS
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