H.B. Fuller's Valuations And Margins Driven By EV Momentum Earns It Analyst Conviction

  • Citigroup analyst Eric Petrie upgraded H.B. Fuller Co FUL from Neutral to Buy and raised the price target from $72 to $85.
  • Valuation has come off, and FUL trades at a ~3.5x forward EV/EBITDA discount vs. comparables, above the historical average, near ~2x. 
  • The analyst had been Neutral rated, as margins were lackluster and below comparables, but expected the gap to close this year. 
  • The price-cost and innovation into megatrends, including packaging sustainability, auto/EVs, and clean energy, will likely drive FUL's margins. 
  • Plus, China re-opening post-CNY and improving growth prospects into the second half is a positive for the highest margin business, Engineering Adhesives, as China accounts for ~30% of segment sales and ~13% for overall FUL. 
  • New CEO Celeste Mastin's priorities were margin uplift and organic sales growth. 
  • Price Action: FUL shares traded higher by 1.49% at $74.44 on the last check Friday.
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