EnPro Industries' Valuation Set To Re-Rate Higher Amid Portfolio Improvements, This Analyst Says

KeyBanc Capital Markets analyst Jeffrey D. Hammond reiterated an Overweight rating on EnPro Industries Inc NPO, raising the price target to $158 from $145.

The analyst is particularly upbeat about the company's core businesses within the Sealing Technologies segment, given its high aftermarket mix, competitive moat, mission-critical applications, and the ability to push prices.

For the 2Q, the analyst expects revenues of $171.4 million in the Sealing Technologies segment, lower than $173.3 million in the first quarter. 

Also Read: EnPro Industries' Effective Cost Management And Growth Strategy Builds Momentum For 2024: KeyBanc

Management cited a couple of exciting new products with opportunities for outsized growth (namely AutoTorq and Dielectric Materials), the analyst notes. 

EnPro is beginning to see synergies between Leanteq and NxEdge, which is supporting deeper penetration with existing customers and incremental wins with new customers, notes the analyst.

Hammond considers the company a key beneficiary of CHIPS Act investment, securing a new facility in Arizona and going through the qualification/ testing process with multiple customers. 

Given portfolio changes and expectations for upward earnings revisions in the near term, Hammond believes NPO shares are undervalued at current levels. 

In the long term, the analyst expects valuation multiples to re-rate higher as investors better appreciate portfolio improvements, which is becoming increasingly apparent in new EnPro's operating results (e.g., higher returns, greater earnings power, and less cyclicality), the analyst adds.

Hammond maintains the 2023 adjusted EPS estimate of $6.85 and the 2024 adjusted EPS estimate of $7.55. 

Total sales in 2Q is estimated to be $278.4 million by the analyst, with Consolidated Pro-Forma operating EPS of $1.75.

Price Action: NPO shares are trading higher by 0.46% to $134.73 on the last check Wednesday.