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Atmus Filtration Technologies Inc. 8-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Atmus Filtration Technologies I
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Filing date:

02/21/2025

TLDR:

Atmus Filtration Technologies Inc. reported its Q4 and full-year 2024 financial results, with net sales of $407 million for the quarter and $1,670 million for the year, and provided 2025 guidance.

ELI5:

Atmus, a filtration company, made more money this year than last year. They expect to keep growing, but need to watch their cash flow.

Accession #:

0001921963-25-000027

Published on

Analyst Summary

  • Net Sales: Increased by 1.8% in Q4 2024 and 2.5% for the full year.
  • GAAP Net Income: Increased in both Q4 and full year 2024.
  • Adjusted EBITDA: Increased in both Q4 and full year 2024, with margins of 19.1% and 19.7% respectively.
  • Diluted EPS increased to $0.48 in Q4 and $2.22 for the full year. Adjusted EPS increased to $0.58 in Q4 and $2.50 for the full year.
  • Gross Profit Margin increased from 26.58% to 27.68%, a 4.14% increase.
  • Operating Profit Margin increased from 15.26% to 15.94%, a 4.45% increase.
  • Net Profit Margin increased from 10.52% to 11.12%, a 5.70% increase.
  • Current Ratio increased from 1.85 to 2.19, an 18.38% increase.
  • Quick Ratio increased from 1.18 to 1.42, a 20.34% increase.
  • Cash Ratio increased from 0.45 to 0.53, an 17.78% increase.
  • Revenue Growth: 2.55%
  • Net Income Growth: 8.35%
  • EPS Growth: 8.29%

Opportunities and Risks

  • Integration Risks: Continued separation costs and working capital inefficiencies related to the Cummins spin-off.
  • Macroeconomic Risks: Potential impact of economic downturns on demand for filtration products.
  • Competition: Intense competition in the filtration industry.
  • Growth Strategy: Execution of growth strategy to expand market share and product offerings.
  • Shareholder Value: Returning value to shareholders through share repurchases and dividends.
  • Market Expansion: Potential for growth in emerging markets.

Potential Implications

Company Performance

  • Continued growth and profitability are expected in 2025 based on company guidance.
  • Decreased cash flow from operations needs to be addressed to ensure long-term financial health.
  • One-time separation and restructuring costs continue to impact profitability.

Stock Price

  • Share repurchase program indicates confidence in future prospects and could positively impact stock price.
  • Positive financial results and growth outlook could lead to increased investor confidence.
  • Decreased cash flow and integration risks could negatively impact investor sentiment.

Atmus Filtration Technologies Inc. – 8-K Filing Report (February 21, 2025)

Executive Summary

This report analyzes Atmus Filtration Technologies Inc.’s 8-K filing, submitted on February 21, 2025, regarding its fourth quarter and full-year 2024 financial results. The company reported positive growth in net sales, GAAP net income, and adjusted EBITDA. Guidance for 2025 indicates continued growth. The company is returning value to shareholders through share repurchases and dividends. Overall, the report suggests a positive outlook for Atmus, but notes some concerns regarding cash flow from operations.

Company Overview

Atmus Filtration Technologies Inc. (NYSE: ATMU) is a global leader in filtration and media solutions, serving various vehicle and equipment markets. The company has a presence on six continents and is headquartered in Nashville, Tennessee.

Detailed Analysis

Financial Performance

Key Highlights:

  • Net Sales: Increased by 1.8% in Q4 2024 and 2.5% for the full year.
  • GAAP Net Income: Increased in both Q4 and full year 2024.
  • Adjusted EBITDA: Increased in both Q4 and full year 2024, with margins of 19.1% and 19.7% respectively.
  • Earnings per Share: Diluted EPS increased to $0.48 in Q4 and $2.22 for the full year. Adjusted EPS increased to $0.58 in Q4 and $2.50 for the full year.

Key Ratios and Trends:

Metric Q4 2024 Q4 2023 FY 2024 FY 2023
Net Sales (Millions) $406.7 $399.7 $1,669.6 $1,628.1
Gross Margin (%) 26.3% 26.4% 27.7% 26.6%
Adjusted EBITDA (Millions) $77.7 $71.4 $329.5 $302.3
Adjusted EBITDA Margin (%) 19.1% 17.9% 19.7% 18.6%
Diluted EPS $0.48 $0.42 $2.22 $2.05
Adjusted EPS $0.58 $0.49 $2.50 $2.31
Cash from Operations (Millions) $20.0 $41.7 $105.4 $189.0
Adjusted Free Cash Flow (Millions) $28.4 $29.9 $114.5 $152.4

Analysis: The increase in net sales, gross margin, and adjusted EBITDA indicates improved operational efficiency and market demand. The company’s ability to increase pricing and manage costs effectively has contributed to these positive results. However, cash flow from operations decreased significantly in both Q4 and the full year, which warrants further investigation.

Management’s Discussion and Analysis (MD&A)

Management highlights the strong financial results driven by industry-leading filtration solutions. They emphasize building long-term shareholder value through growth strategy execution and cash returns. The narrative aligns with the financial data, showcasing a positive outlook.

Uncommon Metrics and Red Flags

  • One-time Separation Costs: The company continues to incur one-time separation costs related to its spin-off from Cummins Inc. These costs impact profitability and cash flow.
  • Restructuring Costs: One-time restructuring costs also impacted profitability.
  • Decreased Cash Flow from Operations: The significant decrease in cash flow from operations is a red flag. The company attributes this to working capital inefficiencies associated with the separation from Cummins. This needs to be monitored closely.
  • Share Repurchase Program: The company repurchased $10 million of common stock and has $130 million remaining under the authorization, indicating confidence in its future prospects.

2025 Outlook

The company’s guidance for 2025 is as follows:

  • Revenue: $1,670 million to $1,735 million
  • Adjusted EBITDA Margin: 19.0% to 20.0%
  • Adjusted Earnings per Share: $2.35 to $2.60

This guidance suggests continued growth and profitability in the coming year.

Risk and Opportunity Assessment

Risks:

  • Integration Risks: Continued separation costs and working capital inefficiencies related to the Cummins spin-off.
  • Macroeconomic Risks: Potential impact of economic downturns on demand for filtration products.
  • Competition: Intense competition in the filtration industry.

Opportunities:

  • Growth Strategy: Execution of growth strategy to expand market share and product offerings.
  • Shareholder Value: Returning value to shareholders through share repurchases and dividends.
  • Market Expansion: Potential for growth in emerging markets.

Conclusion and Actionable Insights

Atmus Filtration Technologies Inc. delivered strong financial results for Q4 and full-year 2024. The company’s growth strategy and focus on shareholder value creation are positive indicators. However, the decrease in cash flow from operations and the ongoing separation costs warrant close monitoring. The 2025 outlook is positive, suggesting continued growth and profitability.

Overall Assessment: The company appears to be on a positive trajectory, but the cash flow concerns need to be addressed.

Recommendations:

  • Monitor cash flow from operations closely and investigate the root causes of the decline.
  • Track the progress of the separation from Cummins and the associated costs.
  • Assess the impact of macroeconomic factors on the company’s performance.

Atmus Filtration Technologies Inc. Financial Analysis (2024 vs. 2023)

1. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Calculation: (Gross Profit / Net Sales)

      • 2024: $462.1 / $1,669.6 = 27.68%
      • 2023: $432.7 / $1,628.1 = 26.58%
    • Trend: Increased from 26.58% to 27.68%, a 4.14% increase.
    • Industry: The automotive parts industry typically sees gross profit margins between 25% and 35%. Atmus is within this range.
  • Operating Profit Margin

    • Calculation: (Operating Income / Net Sales)

      • 2024: $266.2 / $1,669.6 = 15.94%
      • 2023: $248.4 / $1,628.1 = 15.26%
    • Trend: Increased from 15.26% to 15.94%, a 4.45% increase.
    • Industry: A healthy operating margin for the industry is generally between 10% and 20%. Atmus is performing well.
  • Net Profit Margin

    • Calculation: (Net Income / Net Sales)

      • 2024: $185.6 / $1,669.6 = 11.12%
      • 2023: $171.3 / $1,628.1 = 10.52%
    • Trend: Increased from 10.52% to 11.12%, a 5.70% increase.
    • Industry: The industry average net profit margin is around 8% to 12%. Atmus is within this range.
  • Return on Assets (ROA)

    • Calculation: (Net Income / Total Assets)

      • 2024: $185.6 / $1,190.3 = 15.59%
      • 2023: $171.3 / $1,088.6 = 15.73%
    • Trend: Decreased from 15.73% to 15.59%, a -0.89% decrease.
    • Industry: An ROA of 5% or higher is generally considered good. Atmus is performing well above this benchmark.
  • Return on Equity (ROE)

    • Calculation: (Net Income / Total Equity)

      • 2024: $185.6 / $227.4 = 81.62%
      • 2023: $171.3 / $80.7 = 212.27%
    • Trend: Decreased from 212.27% to 81.62%, a -61.55% decrease.
    • Industry: An ROE of 15% or higher is generally considered good. Atmus is performing well above this benchmark.
  • Earnings Per Share (EPS)

    • Basic EPS

      • Calculation: (Net Income / Weighted-average shares for basic EPS)

        • 2024: $185.6 / 83.2 = $2.23
        • 2023: $171.3 / 83.3 = $2.06
      • Trend: Increased from $2.06 to $2.23, an 8.25% increase.
    • Diluted EPS

      • Calculation: (Net Income / Weighted-average shares for diluted EPS)

        • 2024: $185.6 / 83.6 = $2.22
        • 2023: $171.3 / 83.4 = $2.05
      • Trend: Increased from $2.05 to $2.22, an 8.29% increase.

Liquidity

  • Current Ratio

    • Calculation: (Total Current Assets / Total Current Liabilities)

      • 2024: $755.0 / $344.9 = 2.19
      • 2023: $693.0 / $375.0 = 1.85
    • Trend: Increased from 1.85 to 2.19, an 18.38% increase.
    • Industry: A current ratio between 1.5 and 2.0 is generally considered healthy. Atmus is above this range.
  • Quick Ratio (Acid-Test Ratio)

    • Calculation: ((Total Current Assets – Inventories) / Total Current Liabilities)

      • 2024: ($755.0 – $266.6) / $344.9 = 1.42
      • 2023: ($693.0 – $250.0) / $375.0 = 1.18
    • Trend: Increased from 1.18 to 1.42, a 20.34% increase.
    • Industry: A quick ratio of 1 or greater is generally considered healthy. Atmus is above this benchmark.
  • Cash Ratio

    • Calculation: (Cash and Cash Equivalents / Total Current Liabilities)

      • 2024: $184.3 / $344.9 = 0.53
      • 2023: $168.0 / $375.0 = 0.45
    • Trend: Increased from 0.45 to 0.53, an 17.78% increase.
    • Industry: A cash ratio of 0.5 or higher is generally considered healthy. Atmus is above this benchmark.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Calculation: (Total Liabilities / Total Equity)

      • 2024: $962.9 / $227.4 = 4.24
      • 2023: $1,007.9 / $80.7 = 12.49
    • Trend: Decreased from 12.49 to 4.24, a -66.05% decrease.
    • Industry: A debt-to-equity ratio of 1.5 or lower is generally considered healthy. Atmus is above this benchmark.
  • Debt-to-Assets Ratio

    • Calculation: (Total Liabilities / Total Assets)

      • 2024: $962.9 / $1,190.3 = 0.81
      • 2023: $1,007.9 / $1,088.6 = 0.93
    • Trend: Decreased from 0.93 to 0.81, a -12.90% decrease.
    • Industry: A debt-to-assets ratio below 0.5 is generally considered healthy. Atmus is above this benchmark.
  • Interest Coverage Ratio (Times Interest Earned)

    • Calculation: (EBIT / Interest Expense)

      • 2024: (Net Income + Income Tax Expense + Interest Expense) / Interest Expense = ($185.6 + $49.2 + $40.6) / $40.6 = 6.79
      • 2023: (Net Income + Income Tax Expense + Interest Expense) / Interest Expense = ($171.3 + $55.1 + $25.8) / $25.8 = 9.77
    • Trend: Decreased from 9.77 to 6.79, a -30.50% decrease.
    • Industry: An interest coverage ratio of 3 or higher is generally considered healthy. Atmus is performing well above this benchmark.

Activity/Efficiency

  • Inventory Turnover

    • Calculation: (Cost of Sales / Average Inventory)

      • 2024: $1,207.5 / (($266.6 + $250.0) / 2) = 4.67
      • 2023: $1,195.4 / (($250.0 + $0) / 2) = 9.56 (Assuming beginning inventory of 0)
    • Trend: Decreased from 9.56 to 4.67, a -51.15% decrease.
    • Industry: The average inventory turnover for the industry is around 4 to 6. Atmus is within this range.
  • Days Sales Outstanding (DSO)

    • Calculation: (Average Accounts Receivable / Revenue) * 365

      • 2024: (($254.2 + $246.8) / 2) / $1,669.6 * 365 = 33.10
      • 2023: (($246.8 + $0) / 2) / $1,628.1 * 365 = 27.69 (Assuming beginning accounts receivable of 0)
    • Trend: Increased from 27.69 to 33.10, a 19.54% increase.
    • Industry: The average DSO for the industry is around 30 to 40 days. Atmus is within this range.
  • Days Payable Outstanding (DPO)

    • Calculation: (Average Accounts Payable / Cost of Sales) * 365

      • 2024: (($193.1 + $236.6) / 2) / $1,207.5 * 365 = 59.78
      • 2023: (($236.6 + $0) / 2) / $1,195.4 * 365 = 36.17 (Assuming beginning accounts payable of 0)
    • Trend: Increased from 36.17 to 59.78, a 65.28% increase.
    • Industry: The average DPO for the industry is around 30 to 50 days. Atmus is above this range.
  • Asset Turnover

    • Calculation: (Net Sales / Average Total Assets)

      • 2024: $1,669.6 / (($1,190.3 + $1,088.6) / 2) = 1.46
      • 2023: $1,628.1 / (($1,088.6 + $0) / 2) = 2.99 (Assuming beginning total assets of 0)
    • Trend: Decreased from 2.99 to 1.46, a -51.17% decrease.
    • Industry: The average asset turnover for the industry is around 1 to 2. Atmus is within this range.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Calculation: (Stock Price / EPS)

      • 2024: $37.75 / $2.22 = 17.00
    • Industry: The average P/E ratio for the industry is around 15 to 25. Atmus is within this range.
  • Price-to-Book Ratio (P/B)

    • Calculation: (Market Cap / Total Equity)

      • 2024: ($37.75 * 83.6) / $227.4 = 13.89
    • Industry: The average P/B ratio for the industry is around 2 to 4. Atmus is above this range.
  • Price-to-Sales Ratio (P/S)

    • Calculation: (Market Cap / Revenue)

      • 2024: ($37.75 * 83.6) / $1,669.6 = 1.89
    • Industry: The average P/S ratio for the industry is around 1 to 2. Atmus is within this range.
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Calculation: (Market Cap + Total Debt – Cash) / EBITDA

      • 2024: (($37.75 * 83.6) + ($570.0 + $22.5) – $184.3) / $300.2 = 8.82
    • Industry: The average EV/EBITDA ratio for the industry is around 8 to 12. Atmus is within this range.

Growth Rates

  • Revenue Growth

    • Calculation: ((Current Year Revenue – Previous Year Revenue) / Previous Year Revenue)

      • 2024: ($1,669.6 – $1,628.1) / $1,628.1 = 2.55%
  • Net Income Growth

    • Calculation: ((Current Year Net Income – Previous Year Net Income) / Previous Year Net Income)

      • 2024: ($185.6 – $171.3) / $171.3 = 8.35%
  • EPS Growth

    • Calculation: ((Current Year EPS – Previous Year EPS) / Previous Year EPS)

      • 2024: ($2.22 – $2.05) / $2.05 = 8.29%

Other Relevant Metrics

  • EBITDA (non-GAAP)

    • Description: Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of a company’s overall financial performance and is used as an alternative to net income in some circumstances.

      • 2024: $300.2 million
      • 2023: $273.7 million
    • Trend: Increased from $273.7 million to $300.2 million, a 9.68% increase.
  • Adjusted EBITDA (non-GAAP)

    • Description: EBITDA adjusted for one-time restructuring and separation costs. This metric provides a clearer picture of the company’s core operational profitability by excluding these non-recurring items.

      • 2024: $329.5 million
      • 2023: $302.3 million
    • Trend: Increased from $302.3 million to $329.5 million, an 9.00% increase.
  • Free Cash Flow (non-GAAP)

    • Description: Cash from operating activities less capital expenditures. It represents the cash a company is able to generate after spending the money required to maintain or expand its asset base.

      • 2024: $56.8 million
      • 2023: $143.2 million
    • Trend: Decreased from $143.2 million to $56.8 million, a -60.34% decrease.
  • Adjusted Free Cash Flow (non-GAAP)

    • Description: Free cash flow adjusted for one-time restructuring and separation costs. This metric provides a clearer picture of the company’s core operational cash generation by excluding these non-recurring items.

      • 2024: $114.5 million
      • 2023: $152.4 million
    • Trend: Decreased from $152.4 million to $114.5 million, a -24.87% decrease.

2. Commentary

Atmus Filtration Technologies demonstrated a mixed financial performance. Revenue, net income, and EPS experienced moderate growth, indicating solid operational performance. Profitability margins improved, reflecting enhanced efficiency and cost management. However, ROE and free cash flow decreased significantly, primarily due to increased equity and one-time costs. Overall, Atmus shows signs of healthy growth and profitability, but needs to focus on improving cash flow generation and equity management.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️