Axalta Coating Systems Analyst Warns Against Auto OEM, Industrial Headwinds

  • Credit Suisse analyst John Robers initiated coverage on Axalta Coating Systems Ltd AXTA with an Underperform rating and a $20 price target.
  • Robers also initiated Univar Solutions Inc UNVR with an Outperform rating and a $31 price target
  • While not direct competitors, they are two of the largest companies with a regional business model and a focus on industrial markets. 
  • Given the prospect of a global economic downturn, he was cautious about AXTA due to its high exposure to the auto OEM (~30% of sales) and general industrial (~30% of sales) end markets. 
  • The consensus expectation is for pent-up demand to support auto production in a potential downturn and rising interest rate environment, with any pullback in volume offset by a decline in raw materials (i.e., oil). 
  • He believed there was a greater probability that this could be the first downturn without a drop in oil prices than the first downturn without a decline in auto production.
  • His 2023 and 2024 EBITDA estimates are nearly 8% below consensus. 
  • Price Action: AXTA shares traded higher by 2.70% at $23.40 on the last check Friday.
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