On Tuesday, Compass Point adjusted the price target for Fortress Transportation (NASDAQ:FTAI) and Infrastructure Investors LLC (NASDAQ: FTAI), increasing it to $118 from the previous $96, while maintaining a Buy rating on the stock. The firm's decision reflects a positive outlook on the company's future earnings before interest, taxes, depreciation, and amortization (EBITDA).
The adjustment is based on a multiple of 12.5 times the forecasted fiscal year 2026 EBITDA of $1.151.9 million. The optimism stems from expectations of significant positive revisions to estimates, particularly within the aerospace products segment, which is seen as the most valuable in terms of EBITDA and valuation potential.
Fortress Transportation's aerospace products solutions, which cater to CFM26 and V2500 engines, have gained considerable traction due to their time-saving, efficiency-improving, and cost-saving benefits. This has come amid a robust macro environment characterized by persistent engine shortages, which are anticipated to continue for several years.
The market is advised to pay close attention to the upcoming second-quarter 2024 earnings, especially the performance of the aerospace products segment. A potential earnings beat could elevate the segment's annualized EBITDA run-rate to approximately $300 million by mid-2024, surpassing the current forecast of around $250 million.
Previously, Fortress Transportation's EBITDA outlook for fiscal year 2026 was seen as ambitious, but recent developments suggest that a forecast in the range of $1.1 billion to $1.2 billion or higher is now considered reasonable and achievable, taking into account execution risks.
Furthermore, the approval of Parts Manufacturer Approval (PMA) is cited as a significant catalyst, with the potential to add an additional $150 million to $200 million in EBITDA within one to two years.
Shares of Fortress Transportation are expected to see near-term growth, driven by the anticipated second-quarter earnings beat, upward revisions in EBITDA estimates for the products segment, the possibility of PMA approval, and positive adjustments to the company's EBITDA outlook for fiscal years 2024 and 2026.
In other recent news, Fortress Transportation has been the subject of several significant developments. Wolfe Research downgraded the company's stock from Outperform to Peer Perform, citing the stock's significant growth and suggesting that the current valuation may limit further upside potential.
Meanwhile, Deutsche Bank maintained a Buy rating on the company and increased the price target to $100, following Fortress Transportation's announcement of a five-year maintenance services contract with International Aero Engines for V2500 engines.
RBC Capital Markets also adjusted its outlook on Fortress Transportation, increasing the price target to $95 while maintaining an Outperform rating.
This adjustment came in response to the company's new maintenance service agreement with IAE AG for V2500 engines, which is expected to contribute positively to the company's Aerospace Products EBITDA in the coming years.
In a move to expand its global customer base, Fortress Transportation's subsidiary, FTAI Aviation, announced its intent to acquire Lockheed Martin (NYSE:LMT) Commercial Engine Solutions from Lockheed Martin Canada for $170 million. This acquisition aims to bolster FTAI's Maintenance, Repair, and Exchange business.
Fortress Transportation has also concluded its Management Agreement and Services and Profit Sharing Agreement with Fortress Investment Group LLC, transitioning to an internally managed structure.
This significant corporate restructuring was followed by an adjustment in the price target by Compass Point, which increased it to $96.00 while maintaining a Buy rating.
InvestingPro Insights
In light of the recent price target adjustment by Compass Point for Fortress Transportation and Infrastructure Investors LLC, a closer look at the company's financial metrics and market performance reveals additional insights. According to InvestingPro data, FTAI boasts a market capitalization of $10.68 billion and an impressive revenue growth of 32.49% in the last twelve months as of Q1 2024. This growth underpins the positive sentiment shared by Compass Point regarding the company's potential.
InvestingPro Tips highlight the company's perfect Piotroski Score of 9, indicating strong financial health, and analysts' anticipation of sales growth in the current year, which may provide further optimism for investors. Additionally, the company's impressive gross profit margin of 49.19% showcases its efficiency in generating revenue over costs. While FTAI is trading at a high Price/Book multiple of 59.63, reflecting a premium valuation, the company's solid fundamentals could justify this.
Investors interested in a deeper analysis of Fortress Transportation can find 19 additional InvestingPro Tips on the company's performance and outlook, which can be accessed through InvestingPro's platform. To enhance your investment research experience, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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