KeyBanc Believes Welbilt 2019 Guidance May Prove Conservative

Following a few turbulent quarters, Welbilt Inc WBT exhibited signs of stabilization in Tuesday's fourth-quarter earnings release and seems to have entered 2019 with “a clean slate,” according to KeyBanc Capital Markets.

The Analyst

KeyBanc's Jeffrey Hammond maintains an Overweight rating on Welbilt, with an unchanged price target of $20.

The Thesis

Welbilt entered 2019 with no carry-over supplier issues it faced in the second half of 2018 and management’s guidance appears conservative, Hammond said in a note.

The company’s margins were under pressure in 2018, with multiple downward revisions made in the guidance. Welbilt has opportunities to expand its margins beyond 20 percent by yearend 2019.

Margin expansion may begin gradually in the first quarter with price lagging costs. Margins are likely to ramp through the year, with the elimination of all unnecessary costs, a more favorable mix and above-average price realization.

Demand seems to be tracking in-line with expectations, with a gradual improvement in the general market and a moderation in national chains from their high levels. The general market could accelerate significantly as the year progresses, as it still in a nascent stage.

Additional upside could be driven by Crem’s launch in the U.S. market, Hammond mentioned.

Price Action

Shares of Welbilt traded around $15.87 Wednesday afternoon.