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Federal Signal Corp. (FSS)
NYSE:FSS
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Federal Signal
(NYSE:FSS)
77Outperform
Positive Factors
Acquisitions
The acquisition of Hog Technologies adds a highly complementary business to Federal Signal’s existing road marking platform in a market that is experiencing strong growth.
Competitive Position
Federal Signal competes in mostly niche segments where it enjoys strong market positions, translating to above-average pricing power.
Strategic Decisions
Management’s decision to reassign its dealer rights across several Midwestern states should support market share as the company looks to partner with strong third-party dealers.
Negative Factors
Earnings
Shares of FSS traded down 12% after the company reported weaker-than-expected fourth-quarter results.
Market Demand
There had been building investor concern about slowing municipal and industrial demand following two successive quarters of year-over-year ESG order declines.
Federal Signal (FSS) vs. S&P 500 (SPY)
Market Cap
$4.59B
Dividend Yield0.67%
Average Volume (3M)701.22K
Price to Earnings (P/E)21.4
Beta (1Y)1.22
Revenue Growth8.06%
EPS Growth36.93%
CountryUS
Employees4,700
SectorIndustrials
Sector Strength66
IndustryIndustrial - Pollution & Treatment Controls
Share Statistics
EPS (TTM)3.50
Shares Outstanding61,097,073
10 Day Avg. Volume727,983
30 Day Avg. Volume701,219
Financial Highlights & Ratios
PEG Ratio0.58
Price to Book (P/B)N/A
Price to Sales (P/S)2.47
Price to Cash Flow (P/CF)12.70
P/FCF Ratio12.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$91.00Price Target Upside25.17% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering4
Federal Signal Business Overview & Revenue Model
Company DescriptionFederal Signal Corporation, together with its subsidiaries, designs, manufactures, and supplies a suite of products and integrated solutions for municipal, governmental, industrial, and commercial customers in the United States, Canada, Europe, and internationally. It operates through Environmental Solutions Group, and Safety and Security Systems Group. The Environmental Solutions Group segment offers a range of street sweepers, safe-digging trucks ,sewer cleaners, industrial vacuum loaders, vacuum, and hydro-excavation trucks; road-marking, line-removal and waterblasting equipment, dump truck bodies, trailers, and metal extraction support equipment under the Elgin, Vactor, Guzzler, TRUVAC, Westech, Jetstream, Mark Rite Lines, Ox Bodies, Crysteel, J-Craft, Duraclass, Rugby, Travis, OSW, NTE, WTB, Ground Force, Bucks, and Switch-N-Go brand names. It also offers refuse and recycling collection vehicles, camera systems, ice resurfacing equipment, and snow-removal equipment, as well as safety, and security systems. In addition, this segment engages in the sale of parts, service and repair, equipment rental, and training activities. The Safety and Security Systems Group segment provides systems and products for community alerting, emergency vehicles, first responder interoperable communications, and industrial communications. Its products include vehicle lightbars and sirens, industrial signaling equipment, public warning systems, general alarm systems, and public address systems. This segment sells its products under the Federal Signal, Federal Signal VAMA, and Victor brand names. The company sells its products through wholesaler, distributor, independent manufacturer representative, original equipment manufacturer, and direct sales force, as well as independent foreign distributor. Federal Signal Corporation was founded in 1901 and is headquartered in Oak Brook, Illinois.
How the Company Makes MoneyFederal Signal Corporation generates revenue through the sale of its diverse range of products within its two main segments. In the Environmental Solutions segment, the company makes money by selling municipal vehicles and equipment such as street sweepers and sewer cleaners to cities, municipalities, and private contractors. In the Safety and Security Systems segment, revenue is generated through the sale of emergency warning systems, public safety equipment, and communication systems to governmental agencies and industrial clients. Additionally, Federal Signal benefits from aftermarket parts and service revenue, which is derived from the maintenance and repair of its equipment. The company also engages in strategic partnerships and acquisitions to enhance its product offerings and expand its market reach, thus contributing to its earnings.
Federal Signal Financial Statement Overview
Summary
Federal Signal exhibits strong financial health with consistent revenue and profit growth, effective leverage management, and solid cash flow generation. The company is well-positioned for future growth despite minor increases in liabilities and capital expenditures.Income Statement
Federal Signal has shown consistent revenue growth with a strong revenue growth rate of 8.1% over the last year. The gross profit margin has increased to 28.6%, and the net profit margin stands at a healthy 11.6%. EBIT and EBITDA margins are also robust at 15.1%. These metrics indicate strong operational efficiency and profitability. The positive trajectory in revenue and profit growth showcases the company's ability to capitalize on market opportunities.85
Very Positive
Balance Sheet
The company maintains a solid financial position with a debt-to-equity ratio of 0.21, indicating prudent leverage. The return on equity (ROE) has improved to 18.2%, reflecting effective use of equity to generate profits. The equity ratio is substantial at 67.2%, highlighting strong asset backing by equity. While the balance sheet is robust, a slight increase in liabilities warrants attention.78
Positive
Cash Flow
Operating cash flow has increased, supporting a good operating cash flow to net income ratio of 1.07. Free cash flow growth is notable with a 16.2% increase, and a free cash flow to net income ratio of 0.88 indicates healthy cash generation relative to income. The company demonstrates efficient cash flow management, although capital expenditures have slightly increased.82
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.86B | 1.72B | 1.43B | 1.21B | 1.13B | Gross Profit |
| 533.00M | 450.20M | 344.90M | 288.70M | 293.60M | EBIT |
| 281.40M | 224.50M | 160.80M | 130.70M | 131.40M | EBITDA |
| 341.70M | 283.10M | 215.60M | 171.60M | 180.10M | Net Income Common Stockholders |
| 216.30M | 157.40M | 120.40M | 100.60M | 96.20M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 91.10M | 61.00M | 47.50M | 40.50M | 81.70M | Total Assets |
| 1.77B | 1.62B | 1.52B | 1.37B | 1.21B | Total Debt |
| 252.40M | 320.70M | 388.40M | 313.70M | 233.70M | Net Debt |
| 161.30M | 259.70M | 340.90M | 273.20M | 152.00M | Total Liabilities |
| 579.10M | 618.60M | 663.40M | 582.10M | 506.70M | Stockholders Equity |
| 1.19B | 1.00B | 860.90M | 784.00M | 702.10M |
| Cash Flow | Free Cash Flow | |||
| 190.70M | 164.10M | 18.80M | 64.40M | 106.50M | Operating Cash Flow |
| 231.30M | 194.40M | 71.80M | 101.80M | 136.20M | Investing Cash Flow |
| -78.90M | -83.70M | -99.70M | -168.70M | -34.40M | Financing Cash Flow |
| -121.00M | -97.90M | 35.50M | 26.40M | -53.40M |
Federal Signal Technical Analysis
Negative
72.70
Price Trends
81.50
Negative
88.77
Negative
89.61
Negative
Market Momentum
-1.77
Negative
40.99
Neutral
66.64
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FSS, the sentiment is Negative. The current price of 72.7 is below the 20-day moving average (MA) of 75.10, below the 50-day MA of 81.50, and below the 200-day MA of 89.61, indicating a bearish trend. The MACD of -1.77 indicates Negative momentum. The RSI at 40.99 is Neutral, neither overbought nor oversold. The STOCH value of 66.64 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for FSS.
Federal Signal Risk Analysis
Federal Signal disclosed 21 risk factors in its most recent earnings report. Federal Signal reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Federal Signal Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $4.59B | 21.42 | 19.77% | 0.67% | 8.06% | 36.93% | |
72 Outperform | $5.07B | 32.77 | 9.96% | 1.13% | 2.35% | 44.23% | |
67 Neutral | $814.99M | 37.10 | 10.73% | ― | 12.93% | 7.08% | |
64 Neutral | $2.76B | 15.04 | 120.48% | 0.45% | 2.55% | 8.40% | |
63 Neutral | $681.80M | 54.41 | 5.39% | ― | 2.40% | -0.38% | |
62 Neutral | $4.17B | 11.26 | 5.46% | 215.76% | 4.12% | -8.54% | |
38 Underperform | $1.07B | ― | -96.27% | ― | ― | -180.10% |
* Industrials Sector Average
Performance Comparison
FSS
Federal Signal
72.70
-8.82
-10.82%
CECO
Ceco Environmental
17.97
-5.20
-22.44%
ERII
Energy Recovery
14.63
0.88
6.40%
ZWS
Zurn Water Solutions
29.69
-2.08
-6.55%
PCT
PureCycle Technologies
5.56
0.52
10.32%
ATMU
Atmus Filtration Technologies, Inc.
32.20
1.54
5.02%
Federal Signal Earnings Call Summary
Earnings Call Date: Feb 26, 2025 | % Change Since: -19.74% | Next Earnings Date: Apr 30, 2025
Earnings Call Sentiment Positive
The earnings call reflected strong financial performance with record-breaking revenue and strategic acquisitions that are expected to bolster future growth. However, some challenges such as declines in orders for certain products and ongoing lead time issues were noted. Despite these challenges, the company remains optimistic about continued growth.Highlights
Record-Breaking Revenue and Growth
Net sales for 2024 were approximately $1.86 billion, a record high for the company and an increase of $139 million or 8% compared to last year. Operating income for the year rose by 25%, and GAAP diluted EPS increased by 37%.
Acquisition of HOG Technologies
Federal Signal announced the acquisition of HOG Technologies for $78 million, with additional facility purchase, expected to contribute significantly to their road marking business.
Strong Cash Flow and Dividend Increase
The company generated $231 million in operating cash flow for the year, a 19% increase. Dividends are set to increase by 17% to $0.14 per share in the first quarter of 2025.
Environmental Solutions Group Performance
ESG sales grew by 6% year-over-year in Q4, with adjusted EBITDA margins expanding by 130 basis points to 21%. Dump truck body businesses saw a 29% growth year-over-year.
Safety and Security Systems Group Growth
SSG saw a 1% increase in Q4 sales, a 3% increase in adjusted EBITDA, and a 40 basis point improvement in adjusted EBITDA margin. Orders for public safety equipment increased notably.
Lowlights
Decline in Orders for Long Lead Time Products
Orders in Q4 were down 4% year-over-year, primarily due to lower orders for long lead time items like street sweepers and sewer cleaners.
Chassis Parts Impact on Sales
There was a $7 million headwind from fewer chassis parts pass-through sales in Q4 2024.
Challenges in Lead Time Reduction
Efforts to reduce lead times for street sweepers and sewer cleaners have been slower than expected, impacting the ability to meet demand.
Company Guidance
During the call, Federal Signal Corporation provided robust guidance for 2025, anticipating net sales between $2.02 billion and $2.1 billion, reflecting a strong growth trajectory from their record-breaking $1.86 billion in 2024. They projected a double-digit improvement in pretax earnings and expected EBITDA margins to reach the upper half of their target range. Additionally, the company forecasted adjusted EPS between $3.60 and $3.90, marking another year of double-digit growth. This optimistic outlook was supported by their significant backlog, which extends into the first half of 2026, and a strategic focus on increasing production for extended lead time products like sewer cleaners and street sweepers. They also highlighted their newly acquired HOG Technologies, which is expected to contribute $50 million to $55 million in net sales for 2025, and emphasized ongoing investments in organic growth initiatives, potential strategic acquisitions, and an increased dividend payment in the first quarter of 2025.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.