On Tuesday, B.Riley revised its price target for Vishay Precision Group (NYSE: NYSE:VPG), dropping it from $31.00 to $27.00, while maintaining a Neutral rating. The firm expects Vishay Precision Group to report third-quarter results before the market opens on November 5, followed by a conference call at 9:00 a.m. ET.
The revenue estimate set by B.Riley stands at $73.5 million, a decline of 14.4% year-over-year, and marginally below the consensus of $73.9 million. This figure aligns with the company's own guidance, which ranges from $70 million to $78 million.
The firm also anticipates an EBITDA of $8.0 million, which would represent a margin of 10.9%, and pro forma earnings per share (EPS) of $0.19. These figures are in line with, and slightly mixed against, the consensus of $8.0 million and $0.20 respectively. Vishay Precision Group's third-quarter sales are expected to have continued to face challenges due to persistent demand softness, with varied customer order trends across several end markets.
Despite the current pressures, B.Riley notes that there is potential for a sharp recovery in demand for Vishay Precision Group starting in 2025, after seven consecutive quarters of book-to-bill ratios below 1.0x. The second quarter showed a slight improvement in this metric, rising from 0.93x to 0.95x, with orders in the Measurement Systems segment increasing by 3.8% quarter-over-quarter, indicating stronger bookings in the steel and transportation markets.
The management's efforts to develop new business for high-value applications, such as electrification, industrial automation, and advanced measurement systems, are expected to bolster sales and gross margin growth. The price target has been lowered based on a revised valuation methodology, using a 7x multiple of the estimated 2025 enterprise value to EBITDA (down from 8x), due to near-term order challenges and a Manufacturing Purchasing Managers' Index indicating contraction.
B.Riley highlighted that Vishay Precision Group's shares are currently trading at around 6x the estimated 2025 enterprise value to EBITDA, which is less than half of the median for its peer group. This valuation suggests that the company's shares could experience rapid revaluation as order activity begins to improve.
In other recent news, Vishay Precision Group, Inc. (VPG) has made strategic advancements with the acquisition of Nokra Optische Prueftechnik & Automation GmbH, a German company specializing in precision measuring and testing equipment. This move is expected to enhance VPG's product offerings in the market for precision measurement technologies. Furthermore, VPG reported mixed sales trends in its second quarter fiscal 2024 earnings call.
Despite softer sales compared to the previous year, the company has maintained a strong balance sheet and solid free cash flow. VPG's capital allocation strategy includes stock repurchases, and the company remains hopeful about reaching its medium-term revenue and margin targets. In terms of future expectations, VPG anticipates net revenues of $70 million to $78 million for the third quarter and expects a recovery in certain end markets by 2025. .
InvestingPro Insights
To complement B.Riley's analysis, recent data from InvestingPro sheds additional light on Vishay Precision Group's financial position and market performance. The company's market capitalization stands at $314.01 million, with a P/E ratio of 15.22, indicating a relatively modest valuation compared to some industry peers.
InvestingPro Tips highlight that VPG holds more cash than debt on its balance sheet, which could provide financial flexibility during the current period of demand softness noted in the article. Additionally, the company's liquid assets exceed short-term obligations, suggesting a strong liquidity position that may help weather near-term challenges.
The recent stock performance aligns with B.Riley's cautious outlook, as InvestingPro data shows the stock has fallen significantly over the last three months, with a price total return of -29.89%. This decline has brought VPG's stock price to near its 52-week low, trading at 65.84% of its 52-week high.
Despite these challenges, InvestingPro Tips indicate that management has been aggressively buying back shares, which could signal confidence in the company's long-term prospects. This aligns with B.Riley's view of potential recovery in 2025.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for VPG, providing a deeper understanding of the company's financial health and market position.
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