Baird Says Buy Methode On Any Pullback

Methode Electronics Inc. MEI is scheduled to report its FQ1 results on September 1. While Automotive revenue would likely rise, revenue from non-auto businesses could record a decline, Baird’s David Leiker said in a report. He maintained an Outperform rating on the company, with a price target of $45.

FQ1 Preview

Analyst Leiker expects Methode to report its FQ1 EPS at $0.51, down 15 percent y/y, within the consensus estimate range of $0.49-$0.56.

Automotive revenues are expected to grow 1 percent y/y to $155 million, backed by solid volumes on GM K2XX, despite weakness across other GM and Ford platforms. Automotive margins are expected to decline 140bps y/y to 22.0 percent, Leiker mentioned.

Revenues by non-auto businesses are estimated to decline 11 percent y/y, mainly due to weakness in Power business. PowerRail sales are expected to be higher by $9 million y/y, while Interface revenue could record a modest decline, the analyst stated.

Buy On Pullback

Methode’s shares have gained 24 percent versus the market since last quarter, while earnings are expected to be in-line with estimates. Therefore, there seems to be little upside on the company’s FQ1 report.

Leiker added further, “Importantly, this is the end of difficult earnings comps (on Automotive margin and PowerRail sales) and rest of the year should see accelerating revenue/earnings growth. We remain buyers and believe investors should use any pullback as a buying opportunity.”

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