Eight analysts have increased their EPS estimates for this railway system in the past 30 days, and are forecasting triple-digit growth for each of the next five years.
Alstom (Paris: ALO, OTC: ALSMY)
From Capitalist Times
Alstom (Paris: ALO, OTC: ALSMY) is one of the biggest integrated railway systems companies in the world. The $175 billion global rail market has emerged as a big part of the infrastructure investment theme and grows by about 3% per year. And this growth is expected to remain for the foreseeable future, driven by demand in developing and developed economies.
With around $7 billion in sales and another $11 billion in orders, Alstom holds its own in this global market and aims to organically grow sales by 5% annually over the next five years.
Recent orders include parts of Amtrak’s $2 billion high-speed rail system (US sales accounts for around 10% of the group’s sales), Dubai’s $1.5 billion metro and $1 billion for intercity trains in the Netherlands.
Alstom has been expanding its manufacturing sites around the world to offer full solutions to local customers. This effort will cost about $320 million over the next three years. Without ignoring the US and European markets, management has paid special attention to Asia and the Middle East, where growth remains strong.
Infrastructure, and especially rail, almost always involves government and/or tax money and, therefore, some local manufacturing is often necessary. Alstom’s Asia headquarters is in India, where 1,200 of the company’s 6,000 research and development engineers are based. Shipping components and subsystems out of India lowers Alstom’s costs.
The company’s third-quarter results demonstrate management’s ability to drive operational and financial improvements, with operating margins increasing to 5.6% and free cash flow coming in at an impressive $350 million. The latter is an important development, because the company has had a spotty history generating cash.
The company enjoys a four-year backlog worth $35 billion and a debt-free balance sheet. A turnaround play on global infrastructure, Alstom is a buy up to EUR27 in Paris.
Yiannis G. Mostrous, Capitalist Times, www.capitalisttimes.com, 888-960-2759, November 17, 2016