On Monday, CFRA made a notable change to its rating on Alstom (EPA:ALSO) SA shares (ALO:FP) (OTC: ALSMY), moving from "Sell" to "Hold" and increasing the stock price target to €16.00, up from the previous €10.00. This adjustment comes as the analyst believes Alstom is on a clear path to execute its deleveraging plan successfully.
The new stock price target is based on a forward price-to-earnings (P/E) multiple of 18x, which aligns with the 10-year average P/E for the fiscal year ending in March 2025. The analyst has chosen to eliminate the previously applied discount in valuation, citing the company's recent steps towards strengthening its balance sheet as a reason for renewed confidence.
Alstom has recently announced an agreement to sell its North American conventional signaling business to Germany's Knorr-Bremse for approximately €630 million. This sale is part of Alstom's broader €2.0 billion balance sheet reinforcement plan, initially disclosed on November 15, 2023, following a reported negative cash flow of €1.12 billion in the first half of the fiscal year 2024.
CFRA has maintained its earnings per share (EPS) estimate for the fiscal year 2024 at €0.26 but has increased the EPS estimate for the fiscal year 2025 to €0.89 from the former €0.80. The upgrade reflects a reduced level of uncertainty surrounding Alstom's deleveraging efforts, as the sale's value falls within the management's guidance range of €0.5 to €1.0 billion.
Investors and analysts alike are advised to look forward to more detailed information during Alstom's full-year earnings announcement scheduled for May 8, 2024. The company's progress on its financial strategy and future outlook will likely be key points of discussion.
InvestingPro Insights
As Alstom SA (ALSMY) continues to navigate its financial restructuring, recent data from InvestingPro provides additional context for investors. With a market capitalization of $6.3 billion and a challenging P/E ratio of -52.76, the company's financial health is under scrutiny. Still, the adjusted P/E ratio for the last twelve months as of Q2 2024 stands at a more optimistic 22.27, indicating potential for recovery.
While Alstom's revenue growth of 5.14% in the last twelve months reflects a steady business, its gross profit margin of 12.41% suggests there is room for improvement in operational efficiency. InvestingPro Tips highlight that despite being a prominent player in the Machinery industry, Alstom operates with a significant debt burden and is quickly burning through cash, which raises concerns about its short-term liquidity as its obligations exceed liquid assets.
On a positive note, analysts predict that the company will be profitable this year, and the company has seen a strong return over the last three months, with a 31.4% price total return. For investors seeking further insights, there are additional InvestingPro Tips available that could provide a more comprehensive analysis. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of expert tips to navigate Alstom's financial landscape.
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