Prospects for Luxfer Holdings PLC LXFR are impacted by a slowdown in the Elektron segment’s revenue growth momentum and the company undertaking more capex-intensive restructuring initiatives, according to KeyBanc Capital Markets.
The Analyst
KeyBanc’s Philip Gibbs downgraded Luxfer from Overweight to Sector Weight.
The Thesis
The visibility into the Elektron’s sales prospects for 2019-2020 is more limited now, Gibbs said in a note.
He added that SoluMag, the segment’s proprietary fracking dissoluble magnesium alloy bearing product, was expected to have flat sales in 2019, down from the last year’s sales of around $25 million. However, SoluMag’s sales could decline by $5 million-$10 million, given the slowdown in customer order trends.
Sales of zirconium, which accounts for about 20 percent of Elektron’s sales, could record strong year-on-year growth in 2019. The analyst added, however, that 2020 will see the U.S. elections, which makes defense sales less predictable.
Although Luxfer appears on track to recording cost savings of around $15 million by yearend 2019, these cuts were opex and restructuring intensive. The remaining $9 million of annualized net cost savings through 2020-2022 are expected to be more capex intensive, Gibbs mentioned.
Price Action
Shares of Luxfer fell more than 7.5 percent to $22.47 at the time of publication.
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