Today, Axalta Coating Systems has released its 10-K report. Axalta Coating Systems Ltd. is a global manufacturer, marketer, and distributor of high-performance coatings systems, operating through two segments: Performance Coatings and Mobility Coatings. The company offers a wide range of products, including coatings for vehicle repair, industrial applications, and building materials. Axalta Coating Systems' shares have moved 1.4% on the market, and are now trading at a price of $31.51.
In the annual report, Axalta Coating Systems reported a 6.1% increase in net sales for the year ended December 31, 2023, compared to the previous year. The company experienced higher average selling prices and product mix, as well as increased sales volumes in its Mobility Coatings segment. However, the Performance Coatings segment saw lower sales volumes, partially offsetting the overall net sales increase.
In terms of liquidity, the company made changes to its credit agreement, lowering the interest rate spread on its 2029 Dollar Term Loans. Additionally, Axalta Coating Systems issued Senior Notes due in 2031 and voluntarily prepaid $200.0 million of the outstanding principal amount of the 2029 Dollar Term Loans. The company also repurchased 1.8 million shares of its common stock for a total consideration of $50.0 million.
Axalta Coating Systems is currently in the process of upgrading its ERP system, with the migration to the upgraded system in North America completed during the second quarter of 2023. However, the company experienced temporary operational disruptions in North America due to the ERP system implementation, resulting in a negative impact on net sales, particularly in the Performance Coatings segment.
The company also highlighted the deflationary benefits in raw material pricing during the year ended December 31, 2023, compared to the previous year. However, it expects the trend of raw material deflation to moderate in 2024. Additionally, Axalta Coating Systems addressed the impact of Russia's conflict with Ukraine, as well as leadership transitions within the company, including the appointment of a new Chief Financial Officer and General Counsel.
For more information, read the company's full 10-K submission here.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $4,696 | $4,482 | $3,738 | $4,416 | $4,884 | $5,124 |
| Operating Margins | 9% | 11% | 8% | 10% | 9% | 10% |
| Net Margins | 4% | 6% | 3% | 6% | 4% | 5% |
| Net Income (M) | $207 | $249 | $122 | $264 | $192 | $238 |
| Net Interest Expense (M) | $160 | $163 | $150 | $134 | $140 | $197 |
| Depreciation & Amort. (M) | $369 | $113 | $320 | $316 | $303 | $280 |
| Diluted Shares (M) | 243 | 236 | 236 | 232 | 222 | 222 |
| Earnings Per Share | $0.85 | $1.06 | $0.52 | $1.14 | $0.86 | $1.07 |
| EPS Growth | n/a | 24.71% | -50.94% | 119.23% | -24.56% | 24.42% |
| Avg. Price | $29.36 | $27.84 | $24.12 | $30.51 | $26.53 | $31.595 |
| P/E Ratio | 33.75 | 26.26 | 46.38 | 26.76 | 30.85 | 29.53 |
| Free Cash Flow (M) | $353 | $461 | $427 | $437 | $143 | $386 |
| EV / EBITDA | 12.78 | 15.53 | 13.11 | 13.0 | 12.41 | 12.15 |
| Total Debt (M) | $3,864 | $3,834 | $3,893 | $3,830 | $3,704 | $3,543 |
| Net Debt / EBITDA | 3.91 | 4.68 | 4.05 | 3.84 | 4.21 | 3.6 |
| Current Ratio | 2.22 | 2.4 | 2.48 | 1.93 | 1.94 | 2.05 |
Axalta Coating Systems is likely undervalued at its current price of $31.51 per share due to its consistent revenue growth and expanding capital expenditures, suggesting potential for long-term value appreciation. However, the company's operating margins are lower than industry averages, and its PEG ratio indicates overvaluation of its growth potential.
On the positive side, Axalta Coating Systems's capital expenditures are increasing at a rate of 3.1%, and its earnings per share have grown at an annualized rate of 3.9% over the last 6 years. However, the company has stable revenues with a current yearly growth rate of 2.2%, and its operating margins have consistently trailed the industry average. Additionally, the PEG ratio of 2.4 suggests that the market may be overvaluing the company's growth potential.
In terms of value, Axalta Coating Systems's total liabilities far exceed its current assets, and it is trading above its fair value with a high P/E ratio of 26.0 and a P/B ratio of 4.02. The company also has a highly leveraged balance sheet, as indicated by its current Net Debt / EBITDA ratio of 3.6, and its free cash flows have shown a negative growth rate over the last 5 years.
It's important to note that this analysis is not personalized financial advice and should be considered as part of a comprehensive investment strategy.
