The team at Morgans have just lowered their price target on ASX industrials stock Atlas Arteria Ltd (ASX: ALX).
Let's find out why.
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What is Atlas Arteria?
Atlas Arteria is a global owner, operator, and developer of toll roads. It has a portfolio of five toll roads in France, Germany, and the United States. The company was created out of the reorganisation of Macquarie Infrastructure Group in 2010.
This ASX industrials stock has experienced some volatility in the last 6 months.
Its stock price has fluctuated between $5.50 and $4.75.
It closed last week at $4.86.
However, in a recent note out of Morgans, the broker has updated its guidance on this ASX industrials stock. This was alongside a decreased price target.
Looking big picture
Morgans have made slight adjustments to forecasts ahead of Atlas Arteria's FY25 result due to be released on 26 February.
These changes were made due to newer traffic data, inflation updates, FX moves, and a few financing/toll tweaks across ALX's assets.
APRR, the French toll road business, saw slight earnings downgrades as lower inflation will lead to smaller toll increases than previously expected, along with some tax-related adjustments.
At Dulles Greenway in the US, earnings have been upgraded in the short term, but the long-term outlook has been trimmed because future toll increases will be lower than Morgans had previously assumed.
The Chicago Skyway also saw a modest improvement in earnings, although this was partly offset by higher borrowing costs.
The assumption adjustments result in earnings downgrades for APRR, FY25-26 upgrades for Dulles Greenway (but long term downgrades), and mild upgrades for the Chicago Skyway. Forecast of ALX free cashflow and cash reserves is downgraded (but we still see ALX as capable of sustaining the current DPS of 40 cps until at least the end of the decade).
Is there any upside for this ASX industrials stock?
Based on this guidance, Morgans 12 month target price (which includes a mild premium for potential takeover activity) declined 31 cps to $4.74.
Based on last week's closing price, it seems Atlas Arteria shares are trading close to fair value.
The updated price target indicates a downside of just over 2.4%.
Elsewhere, TradingView has an average one year price target of $5.26.
This indicates approximately 8% upside from current levels.
It is worth reminding investors this ASX industrials stock also is expected to is pay unfranked dividend yield of more than 8% this year.
