Various analysts began coverage of UL Solutions (ULS) on Tuesday, with most of them bullish on the security research company.
Wells Fargo initiated the offering with an Overweight rating and a $40 price target, describing the company as a “best-in-class industry leader in Testing, Inspection and Certification (TIC) with tailwinds from: 1) increasing product sophistication, 2) Tighter regulation and 3) Growth of high-margin software business.”
Citi launched the stock with a price target of $41, saying it has the “opportunity to deliver accelerated growth in its critical industrial division.” “At the same time, we see evidence that the consumer division (>40% of revenue in 2023) is cyclically underperforming and see potential for recovery,” the bank added.
William Blair analysts founded ULS at Outperform, noting that it is an “established market leader” with a highly respected brand. The firm believes the company will continue to deliver strong organic and inorganic revenue growth in a market with significant barriers to entry.
ULS started with a Buy rating and a $40 price target for Stifel. “We believe ULS has a leading market position in industrial TICs (43% of revenue) and a strong market position in consumer TICs (44% of revenue),” the company said. “We view UL Solutions as a company with moderate (but not very cyclical) organic revenue growth, where there is potential for earnings growth and the opportunity to improve the business through ongoing acquisitions.”
BofA noted the company’s steady growth. The bank initiated purchases of ULS shares with a target price of $42. “ULS offers robust and recurring (about 45% of total) sales growth, supported by secular megatrends, healthy and growing earnings, and a lean balance sheet,” BofA said.
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Goldman Sachs was more cautious, initiating coverage of ULS with a neutral rating and a 12-month price target of $39. The investment bank explained: “While ULS has comparable or better revenue growth and margin profile relative to peers, we believe it currently deserves a moderate discount to peer valuations, in part due to its lack of public market credentials and lower free cash flow. conversion from EBITDA.”