Is Atmus Filtration Technologies Inc. IPO a Good Buy?

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Contributor, Benzinga
May 24, 2023

At first glance, few if any investors will recognize Atmus Filtration Technologies Inc. as an enticing must-have opportunity. Specializing in industrial and engine filtration, Atmus manufactures products for on-highway commercial vehicles and off-highway agriculture, construction, mining and power generation vehicles and equipment. While serving critical needs, the company lacks the pizzazz associated with contemporary popular sectors such as artificial intelligence and machine learning.

However, initial impressions (and judgments) may be deceiving. Beneath the humdrum exterior lies an enterprise that represents one of the global leaders in its core industry. Atmus’ products enable lower emissions and facilitate superior asset protection, thereby filling a critical gap regarding environmental initiatives.

Just as significantly, Atmus should command a valuation in the billions following its public market debut. Distinguishing itself from other speculative launches, the filtration specialist may be ideal for those seeking consistent, predictable growth rather than the prospect of robust returns at the expense of dependability.

As with any new public listing, Atmus will require careful due diligence. Below are the pros and cons to consider before making your decision.

What Does Atmus Filtration Technologies Do?

Billed as a global leader in filtration and media solutions, Atmus Filtration Technologies designs and manufactures advanced filtration products, principally under its Fleetguard brand, according to the company’s Form S-1 prospectus filed with the U.S. Securities and Exchange Commission (SEC). Atmus’ innovations facilitate lower emissions and offer superior asset protection to its enterprise-level clients.

According to its S-1 disclosure, Atmus estimates that 16% of its net sales in 2022 stemmed from first-fit sales to original equipment manufacturers (OEMs), where they install Atmus products as components for new vehicles and equipment. Further, about 84% of revenue originated in the aftermarket, where clients installed the underlying components as replacement or repair parts. Therefore, the filtration specialist commands a strong recurring revenue base.

Another major advantage that Atmus leverages centers on its global footprint. Serving end-users across approximately 150 countries, about 49% of the industrial firm’s net sales originated outside the U.S. and Canada. The leadership team estimates that with its joint ventures in China and India, Atmus carries a leading position in on-highway and off-highway markets based on 2022 net sales.

Core to Atmus’ new listing stands its full spectrum of proprietary and differentiated filtration solutions. From its prospectus, Atmus products empower its end-users “to extend service intervals, reduce maintenance costs and increase uptime.” The company serves various needs — such as fuel filters, coolants and crankcase ventilation solutions, among others — and its vast asset library enables one-stop shopping.

Currently, Atmus Filtration Technologies represents a business unit under diesel engine manufacturer Cummins (NYSE: CMI). However, during the initial public offering (IPO) process, Cummins will spin off Atmus to become its own separate entity.

When is the Atmus Filtration Technologies IPO Date?

Based on the IPO calendar, market observers anticipate that Atmus may debut its new listing on May 26, 2023. If so, the pricing of the IPO may occur one day earlier on May 25. However, the industrial specialist recently announced the launch of its roadshow, essentially a sales pitch to prospective investors across a number of different locations.

It’s not uncommon for these events (colloquially referred to as dog and pony shows) to last three to four weeks. Therefore, investors should be cautious about the dates. Should the new listing proceed as stated, Atmus shares will trade on the New York Stock Exchange under the ticker symbol ATMU.

Several high-profile financial institutions, including Goldman Sachs (NYSE: GS) and JPMorgan Chase (NYSE: JPM) represent the joint bookrunners on the deal.

According to IPO Renaissance Capital, Atmus seeks to raise $275 million through the distribution of 14.1 million shares. The estimated per-share price spectrum ranges from $18 to $21. At the midpoint of the proposed range, the filtration specialist would command a market value of $1.6 billion.

Although intriguing for its everyday industrial relevance and for helping to undergird various go-green initiatives, ATMU stock will enter the capital market at a contested time. Unsettling investors at the present juncture lies the increasingly worrying debate about whether or not to raise the debt ceiling.

On one hand, if policymakers fail to reach an agreement to raise the ceiling, the U.S. may end up defaulting on its obligations. If a protracted default materializes, then the circumstance may yield a financial crisis and recession, according to a White House statement.

However, raising the debt limit will likely not induce a scarless canvas. Fundamentally, a major criticism of the accommodative practice is that it encourages fiscal irresponsibility. Unfortunately, with no easy answers in sight, investors might not have the appetite for new public listings.

What Analysts are Saying About Atmus Filtration Technologies IPO

While the consumer economy may be looking forward to a return to pre-pandemic norms, the IPO market has yet to reach a healthy equilibrium. That’s according to accounting firm Ernst & Young, which notes that the volume of global IPOs fell 8% on a year-over-year basis during the first quarter of 2023. Further, proceeds fell 61%, imposing a contested arena for ATMU stock.

Unfortunately, the broader downturn in IPO interest means that not too many analysts have weighed in on Atmus’ viability. However, the company spelled out its main ambitions by identifying four strategic catalysts.

  • Growth in freight volumes and industrial activity: With Atmus projecting broader economic growth, U.S. freight activity may double in value between 2020 and 2050. If so, the industrial specialist is well-positioned to serve a ramp-up in filtration demand.
  • Growth in emerging markets:  In particular, the Asian markets — which include India — may see their economies rapidly accelerate compared to Western nations. Given Atmus’ already massive and still-burgeoning global footprint, the industrial firm enjoys a positional advantage.
  • Increased stringency in emissions standards: As leading economies recognize the pertinence of sustainability efforts, demand for industrial filtration products should increase. Cynically, this framework augurs well for Atmus.
  • Technological transition: Over the last several years, environmental advocacy groups such as Climate Watch Data have called for industries around the world to reduce their greenhouse gas (GHG) emissions. To achieve such an ambition while maintaining economic productivity requires technology, a dynamic that favorably suits Atmus.

In addition, Barron’s senior writer Al Root mentions that following the IPO raise, “Atmus won’t get the cash. The money will go, essentially, to reduce Cummins’ indebtedness. Management’s longer-term plan is to distribute Atmus shares to Cummins shareholders, likely a few months after the deal is completed.”

Once the deal closes, ATMU stock should carry a value of approximately 13 times the earnings it would have had as a standalone enterprise in 2022. “It isn’t a heroic multiple, but it is better than the 11 times anticipated 2024 per-share earnings Cummins is selling for,” wrote Root.

On the risk factor side, Atmus — which it might not incur the speculative profile that chases less-rigorous enterprises — depends heavily on global economic resilience. Should growth stagnate, whether in North America or the key Asian markets that Atmus targets, the industrial specialist may suffer significant demand loss. If so, such an outcome would likely not be ideal for ATMU stock.

Atmus Filtration Technologies Financial History

Although Atmus might not appeal to day traders seeking double-digit returns in a single session, its financials confirm the core reason why conservative investors appreciate the opportunity: an established and predictable business framework.

From the company’s Form S-1 disclosure, Atmus posted net sales of $1.56 billion in 2022, representing an 8.6% lift from the prior year’s tally of nearly $1.44 billion. In the pandemic-disrupted year of 2020, Atmus rang up sales of $1.23 billion.

On the bottom line, the industrial specialist saw net income of $170.1 million last year. This figure represented a slight dip of 0.7% against the prior year’s haul of $171.3 million. It’s a conspicuous jump from the net income of $142.8 million delivered in 2020.

As of Dec. 31, 2022, Atmus carries no cash. Its total current assets amount to $512.3 million, whereas its long-term assets tally up to $367.1 million. Total liabilities amount to $429.9 million, yielding a total net parent investment of $449.5 million.

Atmus Filtration Technologies Potential

While the IPO market may be suffering a lull, Atmus carries the potential of delivering consistent growth for prospective shareholders. For one thing, industrial filtration solutions — while a boring topic to most market participants — represent a key industrial application. Without it, machinery may incur reliability woes. The global political framework no longer turns a blind eye to unnecessary emissions. Therefore, Atmus benefits from a consistent demand structure.

At the same time, investors need to be careful about bidding up ATMU stock too aggressively. Because of pressing issues such as the ongoing debt ceiling debate, domestic and global economies face the risk of a prolonged deflationary cycle. If so, industrial entities would presumably look to downsize their fleets and other expenditures, posing challenges against Atmus’ ambitious growth objectives.

Where to Buy Atmus Filtration Technologies IPO Stock

If you want to participate in Atmus Filtration’s IPO, you’ll need to know how to buy stocks. But before you take that step, you must sign up for a brokerage account. Below is a list of the best brokers to consider.

ATMU Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

ATMU Pre-IPO

Unfortunately, pre-IPO information — or the opportunity to acquire shares of new listings at their initial offering price — is not available for ATMU stock. Those interested in early bird opportunities should open an account with ClickIPO.com.

About Joshua Enomoto

His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.