Global Hunter Upgrades Federal Signal, Sees Improving Municipal Markets

Global Hunter Securities upgraded Federal Signal Corporation FSS Tuesday from Neutral to Buy and raised its price target from $16 to $18.

Analyst Walt Liptak’s “investment thesis is that the FSS turnaround should continue in 2015-2016 as the company continues to utilize the 80/20 operating strategy. Dennis Martin (CEO) is leading the company toward higher profitability through a proven operational excellence strategy based on the ITW 80/20 program.”

Liptak expected that “the company will focus on new growth initiatives related to organic product and market expansion and strategic M&A. Additionally, the company's municipal markets should recover in 2015-2016 due to an improving US economy and pent up municipal spending.”

The firm forecasted “Q4:14 sales of $254MM (in line with consensus) and EPS of $0.28 (in line with consensus).” The firm’s 2015 model included “5 percent sales growth to $953MM on the back of mid-single-digit growth in US end markets.”

The $18 price target was based on a breakup valuation model and peer group analysis.’

Federal Signal recently traded at $15.45, up 2.45 percent.