Altra Industrial Motion Corp (NASDAQ: AIMC) faces incremental risks in a few important markets, which weighs on its 2020 outlook, according to KeyBanc Capital Markets.
KeyBanc’s Jeffrey Hammond downgraded on Altra Industrial Motion from Overweight to Sector Weight.
The Class 8 Truck and Industrial-Germany markets could contract by around 15% in 2020, impacting approximately $400 million of Altra Industrial Motion’s revenue, Hammond said in the downgrade note.
He added that both these markets contribute about 20% of the company’s total sales.
The loss in revenue in 2020 could translate to an estimated EBITDA drag of $20 million, more than offsetting the expected synergies from the merger of Fortive Corp’s (NYSE: FTV) Automation and Specialty platform, Hammond said.
He reduced the EPS estimates for 2019 and 2020 from $2.90 to $2.85 and from $3.20 to $2.75, respectively.
The analyst further mentioned that the stock could re-rate in the long term, and that the company “has yet to fully flex its cash generating muscle.” However, he recommended investors to wait for a better entry point.
Shares of Altra Industrial Motion had declined 7.23% to $26.44 at the time of publishing Tuesday.
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|Sep 2019||Downgrades||Overweight||Sector Weight|
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