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Federal Signal Corp. (FSS)
NYSE:FSS
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Federal Signal (FSS) AI Stock Analysis

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FSS

Federal Signal

(NYSE:FSS)

Rating:78Outperform
Price Target:
$112.00
▲(4.21%Upside)
Federal Signal's strong financial performance and positive earnings call are the primary drivers of its stock score. The company's robust growth, profitability, and strategic initiatives are offset by valuation concerns and technical indicators suggesting overbought conditions. Continued focus on managing leverage and sustaining growth will be crucial for maintaining its positive trajectory.
Positive Factors
Market Expansion
Federal Signal’s market share expansion strategy is accelerating with ample opportunities even in its most penetrated product categories.
Order Growth
Robust demand trends are driving record order growth for the company.
Negative Factors
Dealer Network
The recent dealer turnover within Federal Signal’s exclusive channel has become an increasing cause of concern for some investors.
Valuation Concerns
Current valuation leads to a 'price for perfection' scenario, indicating a less favorable risk/reward situation.

Federal Signal (FSS) vs. SPDR S&P 500 ETF (SPY)

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 makes money primarily through the sale of its diverse range of products and services within its two main business segments. The Environmental Solutions segment generates revenue through the manufacturing and sale of equipment used for infrastructure maintenance, such as street sweepers and sewer cleaners, often providing these to municipalities and industrial customers. The Safety and Security Systems segment contributes to revenue by offering products and solutions designed for communication and security, including public safety systems and alerting devices. The company also benefits from aftermarket parts and service offerings, providing ongoing support and maintenance for its equipment, thereby creating a recurring revenue stream. Strategic partnerships with local governments and industrial entities further support its revenue model, enhancing market reach and product adoption.

Federal Signal Earnings Call Summary

Earnings Call Date:Apr 30, 2025
(Q1-2025)
|
% Change Since: 42.26%|
Next Earnings Date:Jul 30, 2025
Earnings Call Sentiment Positive
The earnings call reflected a strong financial performance with record-breaking order intake and significant growth in both the ESG and SSG segments. Despite a decrease in GAAP EPS and increased tax expenses, the company's outlook remains positive, with an increased EPS forecast and strategic initiatives driving market share expansion.
Q1-2025 Updates
Positive Updates
Strong Financial Performance
First quarter 2025 results showed 9% year-over-year net sales growth to $464 million, double-digit operating income improvement, a 170 basis point improvement in adjusted EBITDA margin, and new records in orders and backlog.
Record Order Intake
Order intake for Q1 2025 set a new company record at $568 million, an increase of $65 million or 13% compared to last year.
ESG Segment Growth
Environmental Solutions Group (ESG) reported 9% year-over-year net sales growth and a 17% increase in adjusted EBITDA, with margins expanding by 120 basis points.
SSG Segment Success
Safety and Security Systems Group (SSG) achieved 8% top line growth and a 14% increase in adjusted EBITDA, with a 110 basis point improvement in adjusted EBITDA margin.
Increased EPS Outlook
The company raised its full-year adjusted EPS outlook to a range of $3.63 to $3.90, representing the highest adjusted EPS level in the company's history.
Negative Updates
Decrease in GAAP EPS
GAAP diluted EPS for the quarter was $0.75 per share compared to $0.84 per share in Q1 last year.
Increased Tax Expense
Tax expense for the quarter was $15.7 million compared to a benefit of $700,000 in Q1 last year, primarily due to the effects of higher pretax income levels and the non-recurrence of a $13 million discrete tax benefit.
Company Guidance
During the Federal Signal Corporation's first quarter 2025 earnings call, the company reported robust financial performance with a 9% year-over-year increase in net sales, reaching $464 million. Operating income surged by 21% to $65.7 million, and adjusted EBITDA rose by 21% to $85.1 million, resulting in an improved margin of 18.3%, up from 16.6% the previous year. Orders set a record at $568 million, a 13% rise from last year, and the backlog reached a new high of $1.1 billion. The Environmental Solutions Group (ESG) saw net sales of $387 million, up 9%, while the Safety and Security Systems Group (SSG) reported $76 million in sales, reflecting an 8% increase. Adjusted EPS grew by 19% to $0.76 per share, despite GAAP EPS slightly declining to $0.75 per share. The company's financial position remains strong, with $37 million in cash flow from operations and $220 million in net debt, supporting future investments and strategic acquisitions, such as the recent purchase of HOG Technologies. Federal Signal raised its full-year adjusted EPS guidance to a range of $3.63 to $3.90, maintaining a positive outlook for continued growth.

Federal Signal Financial Statement Overview

Summary
Federal Signal demonstrates strong financial health with consistent revenue growth, robust profitability, and effective cash management. The company maintains a solid financial structure despite minor concerns over net income fluctuations and increased debt levels.
Income Statement
85
Very Positive
Federal Signal has demonstrated consistent revenue growth, with a notable increase in total revenue from prior years. The gross profit and net profit margins have remained strong, signaling effective cost management and profitability. The EBIT and EBITDA margins further highlight the company's operational efficiency. However, the net income has seen a slight decline in the TTM (Trailing-Twelve-Months) period, indicating potential pressure on net earnings.
Balance Sheet
78
Positive
The company's balance sheet shows a robust equity base with a healthy equity ratio, reflecting financial stability. The debt-to-equity ratio is moderate, suggesting manageable leverage. Return on Equity (ROE) is strong, indicating efficient utilization of equity. However, the increase in total debt over the periods could pose long-term risks if not managed carefully.
Cash Flow
82
Very Positive
Federal Signal has shown strong cash flow generation, with consistent operating cash flow that exceeds net income, showcasing effective cash management. The free cash flow growth is impressive, supporting investment and financing activities. The company's ability to generate free cash flow relative to net income underscores operational efficiency. However, fluctuations in capital expenditures and investment cash flows warrant attention.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue1.86B1.72B1.43B1.21B1.13B
Gross Profit533.00M450.20M344.90M288.70M293.60M
EBITDA344.10M283.10M215.60M171.60M180.10M
Net Income216.30M157.40M120.40M100.60M96.20M
Balance Sheet
Total Assets1.77B1.62B1.52B1.37B1.21B
Cash, Cash Equivalents and Short-Term Investments91.10M61.00M47.50M40.50M81.70M
Total Debt252.40M320.70M388.40M313.70M233.70M
Total Liabilities579.10M618.60M663.40M582.10M506.70M
Stockholders Equity1.19B1.00B860.90M784.00M702.10M
Cash Flow
Free Cash Flow190.70M164.10M18.80M64.40M106.50M
Operating Cash Flow231.30M194.40M71.80M101.80M136.20M
Investing Cash Flow-78.90M-83.70M-99.70M-168.70M-34.40M
Financing Cash Flow-121.00M-97.90M35.50M26.40M-53.40M

Federal Signal Technical Analysis

Technical Analysis Sentiment
Positive
Last Price107.48
Price Trends
50DMA
101.67
Positive
100DMA
89.84
Positive
200DMA
91.42
Positive
Market Momentum
MACD
2.09
Positive
RSI
58.61
Neutral
STOCH
39.06
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FSS, the sentiment is Positive. The current price of 107.48 is below the 20-day moving average (MA) of 108.19, above the 50-day MA of 101.67, and above the 200-day MA of 91.42, indicating a bullish trend. The MACD of 2.09 indicates Positive momentum. The RSI at 58.61 is Neutral, neither overbought nor oversold. The STOCH value of 39.06 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 (71)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
78
Outperform
$6.55B31.7318.78%0.48%7.85%15.78%
76
Outperform
$1.19B26.1618.34%8.89%278.44%
76
Outperform
$6.30B38.2810.49%0.93%3.22%38.39%
75
Outperform
$758.08M38.1710.35%10.93%6.99%
72
Outperform
$3.18B17.3695.48%0.52%1.43%12.88%
71
Outperform
¥269.20B13.848.47%2.89%6.33%13.01%
38
Underperform
$2.80B-67.71%-180.10%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
FSS
Federal Signal
107.48
8.77
8.88%
CECO
Ceco Environmental
33.88
3.65
12.07%
ERII
Energy Recovery
13.91
-1.00
-6.71%
ZWS
Zurn Water Solutions
37.83
5.75
17.92%
PCT
PureCycle Technologies
15.58
7.83
101.03%
ATMU
Atmus Filtration Technologies, Inc.
38.04
6.86
22.00%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Jul 03, 2025