Beat the market with Allied Motion Technologies, says Roth

Ahead of first quarter earnings due on Wednesday from Allied Motion Technologies (Allied Motion Technologies Stock Quote, Charts, News, Analysts, Financials NASDAQ:AMOT), Roth Capital Partners analyst Gerry Sweeney is staying bullish on the stock, saying in a Monday report that strong orders and backlog for the sensor company bode well for the rest of 2023.

Headquartered in Amherst, NY, Allied Motion makes precision and specialty motion control components and systems, with global target markets including Vehicle, Industrial, Medical and Aerospace & Defense. 

The company finished 2022 with revenue up 25 per cent over the previous year to $503.0 million and net income of $17.4 million or $1.09 per diluted share versus $24.1 million or $1.66 per share a year earlier. (All figures in US dollars.)

For the upcoming Q1 2023, due after market close on Wednesday, Sweeney is calling for revenue of $136.3 million, adjusted EBITDA of $17.5 million and adjusted EPS of $0.43 per share. The analyst said AMOT finished 2022 with order bookings and backlog at or near all-time highs, and while gross margins were a little lighter than expected over the fourth quarter, investors can expect improvement over 2023 on the back of price increases.

“Growth should be driven by end markets and AMOT’s continued focus on increased solution sales,” Sweeney wrote. “Orders and backlogs exiting 4Q were at or near record levels, which backs strength into 2023. In addition, we expect improved margins in 1Q and for the full year driven by price increases (catch up on inflationary pressures) and mix.”

On revenue, Sweeney has forecasted $554.9 million for 2023 and $581.0 million for 2024, while on EBITDA the call is for $74.8 million in 2023 and $82.6 million in 2024.

Sweeney said Allied Motion’s gross margins should rise to 31.8 per cent, while he said he continues to monitor the company’s debt to EBITDA ration, which currently sits at 3.4x.

“This level is more than supportable, but we believe deleveraging would make the stock more attractive to a larger investor base,” he wrote. 

By segment, Sweeney noted that Allied Motion has made a number of acquisitions in Aerospace & Defense last year, all of which enhance AMOT’s value proposition to customers. The analyst said the segment should see continuing strong demand in 2023 as the economy recovers and passenger air traffic returns to pre-pandemic levels.

The company’s Industrial Revenue has also seen recent acquisitions and should also see continued strong demand in 2023, according to Sweeney, while in its Medical business, the trend is mixed, with downward pressure from lower pandemic-related sales continuing, while higher-margin surgical-related end markets have picked up since the return of elective surgeries.

Finally, on its Vehicle business, Sweeney related that management expects demand to be muted in the near term but to pick up over the second half of the year. 

“As supply chain improves and demand schedules for auto customers firm up, AMOT likely sees modest growth driven by higher demand from trucks, power sports and commercial automotive,” Sweeney wrote.

With the update, Sweeney maintained a “Buy” rating on AMOT and $45.00 target price, which at press time implied a one-year return of 30.7 per cent.