Opinions
Bill Harris, CFA
Atkore
ATKR-N
TOP PICK
Feb 09, 2023
Stock price when the opinion was issued
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Atkore delivers a unique portfolio of integrated electrical raceway solutions that deploy, isolate and protect a structure’s electrical circuitry from source to outlet. with 3,100 employees and 39 manufacturing and distribution facilities worldwide, we meet our customers’ needs by providing unmatched quality, delivery and value across a robust product line that includes steel, pvc and aluminum conduit, armored cable and flexible conduits, metal framing, wire baskets, cable trays and other complementary products including fittings and mechanical pipe. our mission is to be the customer’s first choice in electrical raceway and mechanical products and solutions by providing unmatched quality, delivery, and value based on sustainable excellence in strategy, people and processes.
ATKR is viewed as a bit of an AI name, providing equipment for data center and electrical infrastructure and this space has seen some negative sentiment as investors become concerned with the demand for AI related products/services over the last month. The company also posted a weaker quarter this past week which didn't help things. Fundamentally things look quite strong here and the valuation is cheap but it might take another quarter or two for investors to get interested in this name again, given the recent results.
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ATKR provides electrical wiring along with infrastructure and safety for utility growth. It is a steady performer and continually grows its market share. It trades at 7x earnings, 2x book and supports a 36% ROE. It has been prudently using some cash reserves to buy back shares and retire debt. We recommend setting a stop-loss at $60, looking to achieve $121 -- upside potential of 38%. Yield 1.4%
(Analysts’ price target is $121.67)ATKR is somewhat of an AI name. It provides equipment for data center and electrical infrastructure. We think its fudamentals are strong. Net debt is $599.8B currently, which we are fine with given a Net dbet/EBITDA ratio at 0.8x. Total debt-to-equity is also 0.618x and EBIT/Interest Expense is 17.5x. While ATKR has some debt, it generates more than enough cash to cover interest payments and has not been issuing more debt recently. On the tax loss front, it certainly could be a candidate with it down over 40% year-to-date where recent quarterly results were not great with sales and earnings guidance for FY2025 coming in well below expected. Tax loss selling tends to peak this week or next. We think the weak results may be a drag to get investors interested in the near-term. It is cheap still at 11x forward earnings but we would revisit it in January if interested.
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Cabling. Essential, simple business. Clean to understand. Taps into electrification of everything. Inexpensive. You can own the sexy stocks, but they still all need wiring. Gradually growing. Picks and shovels. No dividend.
(Analysts’ price target is $169.80)