Coats Group plc: Resilient Growth and Strategic Adjustments Justify Buy Rating

Analyst David Farrell of Jefferies maintained a Buy rating on Coats Group plc (COA – Research Report), retaining the price target of p130.00.

David Farrell has given his Buy rating due to a combination of factors that highlight Coats Group plc’s resilience and potential for growth. Despite some uncertainties regarding the full-year outlook, the company’s recent trading update has shown respectable performance, with a 4% revenue growth over the first four months. This growth is particularly notable given the disruptions faced by key markets like the US, Vietnam, Bangladesh, and Indonesia, which are dealing with high tariffs.
Furthermore, Coats Group’s ability to maintain and potentially improve its margins is a positive indicator. The company expects to achieve EBITA margins consistent with its raised guidance, between 19% and 21% for the first half of the year. This aligns well with the consensus forecasts for FY25, which anticipate an 18.5% EBITA margin. Additionally, strategic cost savings and benefits from recent business adjustments, such as the US Yarns disposal and closure of Toluca Americas, are expected to support future financial performance. These factors collectively contribute to the positive outlook and justify the Buy rating.