Axalta Coating Systems Ltd. (NYSE:AXTA) is among the 9 Undervalued Chemical Stocks to Buy According to Hedge Funds. RBC Sees Modest Growth Momentum for Axalta Coating Systems Ltd. (AXTA) Despite Lower Volumes The next stock on our list is Axalta Coating Systems Ltd. (NYSE:AXTA). TheFly reported on February 12 that RBC Capital raised its price target on AXTA to $35 from $33, while keeping a Sector Perform rating. It was noted that lower volumes caused the company to fall short of fourth-quarter projectio ...

Core Insights - Axalta Coating Systems Ltd. (AXTA) has shown disappointing performance since the last update, despite initial expectations of progress [1] Company Performance - The company has faced weakness in its served end markets, which has negatively impacted its performance [1]

Core Insights - Axalta Coating Systems Ltd. (AXTA) has shown disappointing performance since the last update, despite initial expectations of progress [1] Company Performance - The company has faced weakness in its served end markets, which has negatively impacted its performance [1]

Axalta Coating Systems Ltd. (NYSE:AXTA) is one of the most undervalued mid cap stocks to buy now. On February 11, UBS analyst Joshua Spector raised the firm’s price target on Axalta Coating to $36 from $35 and maintained a Neutral rating. On the same day, Baird raised its price target on Axalta Coating to $37 from $35 while maintaining a Neutral rating. The firm updated its financial model following the company’s Q4 2025 results and noted that execution remains solid. BMO Capital also raised its price t ...

Indebtedness and Financing - The company has significant indebtedness, which could limit its ability to obtain additional financing and may require a substantial portion of annual cash flow to service interest payments [148]. - A substantial portion of the company's indebtedness bears interest at variable rates, increasing financial vulnerability in elevated interest rate environments [156]. - The company is dependent on cash flow from subsidiaries and joint ventures to meet debt service obligations, which may be affected by various external factors [147]. - The company may need to seek additional financing to compete effectively, which could be limited by market conditions [152]. Shareholder Returns and Repurchase - The company has a common share repurchase program authorized for $700 million, with $435 million remaining available, but the Merger Agreement restricts share repurchases [162]. - The company does not expect to pay dividends on common shares, making future returns dependent on share price appreciation [161]. - The market price of the company's common shares has fluctuated significantly, which could impact investors' ability to sell shares at desired prices [159]. - The company may engage in restructurings that could alter the economic features of its common shares, affecting shareholder rights [157]. Legal and Regulatory Risks - The company is subject to various legal and regulatory risks due to its Bermuda incorporation, which may afford less protection to shareholders compared to U.S. corporations [167]. - The company has anti-takeover provisions that may discourage third-party acquisitions without Board consent, including the ability to remove directors only for cause [169]. - The legal and regulatory landscape surrounding AI technologies is rapidly changing, which may impose operational costs and legal liabilities [175]. - The company is subject to complex data privacy laws, and failure to protect customer information could lead to reputational damage and regulatory fines [182]. Competition and Market Risks - The company faces substantial competition from various international, national, regional, and local competitors, which could adversely affect its financial condition and results of operations [176]. - The company is exposed to credit risk from customers, which could lead to financial losses if customers default on obligations [177]. - Currency risk is significant as a large portion of net sales comes from outside the U.S., affecting financial results due to exchange rate fluctuations [178]. Operational Risks - The company is implementing a new ERP system critical for operations, and failure to implement it successfully could harm financial condition and results [173]. - Cybersecurity threats are evolving, and the company may face significant resource expenditures to enhance its control environment against potential attacks [172]. - External events such as geopolitical conflicts and natural disasters may materially impact the company's operations and financial condition [179]. Tax and Compliance Risks - The company may face increased tax liabilities due to changes in tax laws or rates, which could adversely affect financial results [183]. - The OECD's Pillar Two framework imposes a minimum corporate tax rate of 15%, effective January 1, 2024, which may impact future effective tax rates and cash tax liabilities [186]. - The One Big Beautiful Bill Act maintains a 21% corporate tax rate and makes permanent beneficial provisions from the Tax Cuts and Jobs Act, reducing cash paid for taxes in 2025 [187]. - The company faces increasing sustainability-related compliance costs due to new regulations, which could raise overall operational costs [188]. Financial and Currency Risks - Interest rate risk indicates that a one-eighth percent change in applicable interest rates could impact cash interest expense by approximately $1 million annually [331]. - A hypothetical 10% increase in the U.S. Dollar value could increase cumulative translation loss by $355 million, reflecting significant foreign exchange risk [333]. - The company incurs significant revenues and costs in various foreign currencies, exposing it to fluctuations that may impact profitability and cash flows [335]. - Commodity price risk is managed through strategic contracts and pricing mechanisms, but fluctuations in raw material prices can still affect cost of sales [337]. - The treasury policy aims to ensure adequate financial resources while managing currency and interest rate risks [338].

Financial Data and Key Metrics Changes - In Q4 2025, Axalta reported net sales of approximately $1.3 billion, with adjusted EBITDA of $272 million and a margin of 21.5%, an improvement of 50 basis points year-over-year [5][12] - For the full year 2025, adjusted EBITDA reached $1.13 billion, a growth of $317 million from 2024, with margins expanding over 500 basis points to 22% [7][18] - Adjusted diluted EPS for Q4 was $0.59, roughly flat year-over-year, while for the full year, it increased approximately 55% to $2.49 [7][18] Business Line Data and Key Metrics Changes - Mobility Coatings achieved record fourth-quarter net sales of $471 million, a 1% increase year-over-year, with adjusted EBITDA rising 20% to $92 million [15][16] - Performance Coatings saw a 6% decline in Q4 net sales to $791 million, primarily due to lower volumes and unfavorable price mix [15] - Refinish net sales decreased 7% to $509 million in Q4, reflecting low claim activity and adjusted order patterns [15] Market Data and Key Metrics Changes - North America faced significant macro headwinds, impacting all business lines, with a 4% decline in net sales year-over-year [12][17] - In Asia-Pacific, the Industrial segment delivered 5% net sales growth despite a weaker macro environment [9][49] - Class 8 builds in North America were down roughly 30% compared to assumptions, indicating a broader slowdown in fleet refresh activity [10][12] Company Strategy and Development Direction - Axalta is focused on operational excellence, cost management, and strategic investments, including a record $196 million in CapEx to support productivity [9][19] - The company announced a merger of equals with AkzoNobel, expected to create a global leader in performance coatings with significant synergy potential of $600 million [26][27] - The strategy includes enhancing product offerings and expanding market presence, particularly in the economy segment and adjacencies [63] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macro challenges but expressed confidence in the company's resilience and ability to manage costs effectively [8][11] - For 2026, the company anticipates a slower start but expects recovery in the second half driven by various catalysts, including interest rate reductions and improved consumer affordability [22][23] - Management emphasized the importance of maintaining strong margins and operational performance despite market pressures [11][19] Other Important Information - Axalta achieved record cash generation in Q4, with operating cash flow of $344 million and free cash flow of $290 million [14] - The company reduced interest expense by 11% and SG&A expenses by 8% year-over-year, contributing to improved financial performance [13][19] - The net leverage ratio decreased to 2.3 times at year-end, the lowest in the company's history [19] Q&A Session Summary Question: Status of global refinish markets - Management indicated that destocking trends are expected to end by Q2 2026, with confidence in recovery based on current performance and market conditions [31][32] Question: Conviction in achieving $600 million in synergies - Management noted improving investor sentiment and emphasized the creation of a leading global performance coatings company as a key message [38][39] Question: Performance Coatings and Industrial trends - Management acknowledged lower sales in Industrial but highlighted growth in Asia and expected improvements in the back half of 2026 [48][49] Question: Margin assumptions for the year - Management expects EBITDA margins to remain above 22% for 2026, driven by cost actions and productivity improvements [56] Question: Refinish strategy evolution post-merger - Management highlighted complementary strengths in refinish and mobility segments, indicating a focus on enhancing distribution and product offerings [62][63]

Financial Data and Key Metrics Changes - In Q4 2025, Axalta reported net sales of approximately $1.3 billion, with adjusted EBITDA of $272 million and a margin of 21.5%, an improvement of 50 basis points year-over-year [5][12] - For the full year 2025, adjusted EBITDA reached $1.13 billion, a growth of $317 million from 2024, with margins expanding over 500 basis points to 22% [7][18] - Adjusted diluted EPS for Q4 was $0.59, roughly flat year-over-year, while for the full year, it increased approximately 55% to $2.49 [7][18] Business Line Data and Key Metrics Changes - Mobility Coatings achieved record net sales of $471 million in Q4 2025, a 1% increase from the prior year, with adjusted EBITDA rising 20% to $92 million [15][16] - Performance Coatings saw a 6% decline in Q4 net sales to $791 million, primarily due to lower volumes and unfavorable price mix [15] - Refinish net sales decreased 7% to $509 million in Q4, reflecting low claim activity and adjusted order patterns [15] Market Data and Key Metrics Changes - North America faced significant macro headwinds, impacting all business lines, with a noted 30% decline in Class 8 builds [10][12] - In Asia-Pacific, the Industrial segment delivered 5% net sales growth despite weaker macro conditions [9] - The overall demand in North America and Europe for Industrial coatings was significantly weaker than anticipated [10] Company Strategy and Development Direction - Axalta is focused on operational excellence, cost management, and strategic investments to enhance productivity and service levels [8][9] - The company announced a merger of equals with AkzoNobel, expected to create a global leader in performance coatings with significant synergy potential of $600 million [26][27] - The strategy includes maintaining a strong balance sheet while investing in productivity and returning capital to shareholders [19][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macro challenges but expressed confidence in the company's resilience and ability to manage costs effectively [11][18] - For 2026, the company anticipates a slower start but expects recovery in the second half driven by various catalysts, including interest rate reductions and improved consumer affordability [22][23] - Management emphasized the importance of operational actions taken to strengthen the business and protect margins in preparation for market recovery [11][12] Other Important Information - Axalta achieved record cash generation in Q4, with free cash flow of $290 million, driven by improved working capital and lower interest payments [14][21] - The company reduced gross debt by approximately $230 million, lowering the net leverage ratio to 2.3 times, the lowest in its history [19] Q&A Session Summary Question: Status of global refinish markets - Management noted destocking trends were slightly worse than expected, but growth was seen in South America, Europe, and Asia [31][32] Question: Conviction in achieving $600 million in synergies - Management indicated improving investor sentiment and emphasized the creation of a large global performance coatings company with significant revenue and EBITDA potential [38][39] Question: Performance of Industrial segment - Management acknowledged lower sales in Industrial but highlighted growth in Asia and expected improvements driven by policy changes [49][50] Question: Margin assumptions for the year - Management expects to maintain EBITDA margins above 22% with cost actions and productivity improvements contributing positively [56] Question: Refinish strategy evolution post-merger - Management highlighted complementary strengths in refinish and mobility segments, indicating opportunities for growth in various regions [62]

Financial Data and Key Metrics Changes - In Q4 2025, Axalta reported net sales of approximately $1.3 billion, with adjusted EBITDA of $272 million and a margin of 21.5%, an improvement of 50 basis points year-over-year [4][12] - For the full year 2025, adjusted EBITDA reached $1.13 billion, a growth of $317 million from 2022, with margins expanding over 500 basis points to 22% [5][16] - Adjusted diluted EPS increased approximately 55% over the same period, reaching an all-time high [5][16] - Free cash flow for 2025 was $466 million, an increase of over $300 million compared to 2022 [5][16] Business Line Data and Key Metrics Changes - Mobility Coatings achieved record fourth-quarter performance with net sales of $471 million, a 1% increase year-over-year, and adjusted EBITDA increased 20% to $92 million [14] - Performance Coatings saw a 6% decline in Q4 net sales to $791 million, primarily due to lower volumes and unfavorable price mix [13] - Refinish net sales decreased 7% to $509 million in Q4, reflecting low claim activity and adjusted order patterns [13] - Industrial net sales declined 5% year-over-year to $282 million, driven by volume declines in North America and Europe [13] Market Data and Key Metrics Changes - North America faced significant macro headwinds, impacting all business lines, with light vehicle production running about 1% below expectations and Class 8 builds down roughly 30% [9][11] - Despite challenges, the Asia-Pacific region delivered 5% net sales growth in Industrial, indicating resilience in that market [8][46] Company Strategy and Development Direction - The company is focused on operational excellence, cost management, and strategic investments, including a record $196 million in CapEx to support productivity [8][17] - Axalta announced a merger of equals with AkzoNobel, expected to create a global leader in performance coatings with significant synergy potential of $600 million [24][25] - The merger aims to enhance market position and drive growth through complementary strengths in various segments [59][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macro challenges but expressed confidence in the company's ability to navigate these issues and prepare for future growth [10][19] - For 2026, management anticipates a slower start but expects recovery in the second half driven by various catalysts, including interest rate reductions and improved consumer affordability [19][22] - The company plans for revenue to decline mid-single digits in Q1 but expects low single-digit growth for the full year, driven by positive price mix and higher volumes in the second half [22][23] Other Important Information - Axalta achieved a record for cash generation in Q4, with cash from operations of $344 million and free cash flow of $290 million [12] - The company reduced interest expense by 11% and SG&A expenses by 8% year-over-year, contributing to improved financial performance [11][12] Q&A Session Summary Question: Status of global refinish markets - Management noted destocking trends impacting performance, with expectations for recovery in Q2 2026 as destocking ends [27][30] Question: Margin assumptions for the year - Management indicated expectations for EBITDA margins to remain above 22%, supported by cost actions and productivity improvements [51][53] Question: Refinish strategy evolution through the merger - The merger is expected to enhance capabilities in the refinish segment, leveraging complementary strengths in premium and economy markets [58][59] Question: Raw material pricing outlook - Management anticipates flat raw material costs year-over-year, with potential increases in the second half offset by productivity gains [62]

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Axalta Coating Systems (AXTA) came out with quarterly earnings of $0.59 per share, missing the Zacks Consensus Estimate of $0.61 per share. This compares to earnings of $0.6 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -2.40%. A quarter ago, it was expected that this high-performance coating system maker would post earnings of $0.64 per share when it actually produced earnings of $0.67, delivering a surprise of +4.69%.Over ...