Altra Industrial Motion Corp AIMC faces incremental risks in a few important markets, which weighs on its 2020 outlook, according to KeyBanc Capital Markets.
The Analyst
KeyBanc’s Jeffrey Hammond downgraded on Altra Industrial Motion from Overweight to Sector Weight.
The Thesis
The Class 8 Truck and Industrial-Germany markets could contract by around 15% in 2020, impacting approximately $400 million of Altra Industrial Motion’s revenue, Hammond said in the downgrade note.
He added that both these markets contribute about 20% of the company’s total sales.
The loss in revenue in 2020 could translate to an estimated EBITDA drag of $20 million, more than offsetting the expected synergies from the merger of Fortive Corp’s FTV Automation and Specialty platform, Hammond said.
He reduced the EPS estimates for 2019 and 2020 from $2.90 to $2.85 and from $3.20 to $2.75, respectively.
The analyst further mentioned that the stock could re-rate in the long term, and that the company “has yet to fully flex its cash generating muscle.” However, he recommended investors to wait for a better entry point.
Price Action
Shares of Altra Industrial Motion had declined 7.23% to $26.44 at the time of publishing Tuesday.
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