Stifel remains bullish on ATS

ATS Corporation (ATS Corporation Stock Quote, Chart, News, Analysts, Financials TSXV:ATS) shares jumped after reaching a US$135-million settlement with a major EV customer, resolving a prolonged dispute and removing a legal overhang that could have dragged on for two years, Stifel analyst Justin Keywood said in a May 28 note.

He maintained a “Buy” rating, citing strong quarterly results, robust order growth and expectations for improved free cash flow and continued deleveraging through fiscal 2026.

ATS reported full fourth-quarter results in line with its preliminary release, which included news of a US$135-million (C$194-million) settlement with an EV customer. The resolution removed a major legal overhang, lifting shares and avoiding a potential two-year court battle.

ATS provides advanced automation solutions for global manufacturers across various industries, including life sciences, food and beverage, transportation, consumer products, and energy. ATS employs over 7,500 people across more than 65 manufacturing sites and 85 offices worldwide, including North America, Europe, Asia, and Oceania.

Excluding the EV settlement, ATS posted a strong fourth quarter with backlog up 19% to $2.1 billion and bookings up 10% to $863-million, for a book-to-bill ratio of 1.2. Life Sciences, Food & Beverage, and Nuclear—representing about 80% of sales—showed solid outlooks. Free cash flow was $10-million, ahead of expectations.

“We anticipate more robust FCF in F2026 and continued deleveraging in the business,” Keywood said. “ATS ended FQ4 at 3.9x net/debt EBITDA, and we forecast 3.4x NTM, including the EV settlement.”

ATS shares jumped May 26 on preliminary Q4 results and news of a US$135-million EV dispute settlement, which, while at the low end of expectations (~55% of claimed value), removes a major overhang and trims net debt by ~0.25x. With stronger margins and free cash flow expected, the stock is likely to continue re-rating in the coming quarters.

“The results also showed favourably, particularly order bookings at $863mm vs our ~$700mm expectation and a book-to-bill ratio of ~1.2x, despite the tariff backdrop, Adj. EBITDA margin was slightly lower than anticipated at 13.5% vs 13.9% estimated, but in line on an absolute basis ($97mm vs $95mm est) given the greater sales $721mm vs $684mm estimated,” Keywood said.

Keywood said Stifel still views ATS as undervalued, at around 13x NTM EBITDA, compared to peers in automation that trade at multiples 20–40% higher.

“ATS quarters ahead are anticipated to be incrementally better, along with continued deleveraging, leading to greater value,” he said. “We anticipate ATS will exit F2026 at ~3.4x net debt/ EBITDA vs ~3.9x currently. EV Settlement ATS to receive US$135mm (C$194mm) of +$350mm in dispute with a large EV OEM. The amount will be paid in FQ1 2026 (end June 30, 2025).”

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