Federal Signal (FSS) AI Stock Analysis

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Federal Signal

(NYSE:FSS)

Rating:78Outperform

Price Target:

$112.00

▲(11.49%Upside)

Federal Signal's strong financial performance and positive earnings call sentiment are the most significant factors driving the overall score. The bullish technical indicators support the current momentum, although overvaluation concerns and overbought signals warrant caution. The company's strategic growth initiatives and market expansion potential contribute positively to its outlook.

Positive Factors

Financial Performance

Shares of FSS traded up nearly 8% after the company reported in-line first-quarter results and record orders across both the ESG and SSG segments.

Market Strategy

Federal Signal’s market share expansion strategy is accelerating with ample opportunities even in its most penetrated product categories.

Production and Expansion

Management has been encouraged by the progress made to increase production volumes of sewer cleaners and four-wheeled street sweepers.

Negative Factors

Investor Concerns

There had been building investor concern heading into the print about slowing municipal and industrial demand following two successive quarters of year-over-year ESG order declines.

Production Challenges

Production challenges continue to impede two of Federal Signal’s largest product categories: street sweepers manufactured in Elgin and sewer cleaners in Streator, Illinois.

Valuation Concerns

Despite strong fundamentals, valuation is not inexpensive—FSS trades at ~13x NTM EV/EBITDA, which is above peers.

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

Market Cap

$6.05B

Dividend Yield0.52%

Average Volume (3M)484.28K

Price to Earnings (P/E)29.1

Beta (1Y)1.23

Revenue Growth7.85%

EPS Growth15.78%

CountryUS

Employees4,700

SectorIndustrials

Sector Strength91

IndustryIndustrial - Pollution & Treatment Controls

Share Statistics

EPS (TTM)0.76

Shares Outstanding60,968,838

10 Day Avg. Volume382,760

30 Day Avg. Volume484,278

Financial Highlights & Ratios

PEG Ratio-10.23

Price to Book (P/B)4.55

Price to Sales (P/S)0.00

P/FCF Ratio27.45

Enterprise Value/Market Cap0.94

Enterprise Value/Revenue0.77

Enterprise Value/Gross Profit10.57

Enterprise Value/Ebitda4.25

Forecast

1Y Price Target

$102.25

Price Target Upside1.78% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering5

Federal Signal Business Overview & Revenue Model

Company DescriptionFederal Signal Corporation (FSS) is a leading global designer and manufacturer of products and integrated solutions for municipal, governmental, industrial, and commercial customers. The company operates in two main segments: Environmental Solutions and Safety and Security Systems. Its core products and services include street sweepers, sewer cleaners, industrial vacuum trucks, hydro-excavators, waterblasting equipment, and safety and security systems such as alert and notification systems, as well as public safety equipment and solutions.

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: 32.97%|

Next Earnings Date:Jul 24, 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, profitability, and effective cash management. While net income fluctuations and increased debt are minor concerns, the company maintains a solid financial structure and is well-positioned in its industry.

Income Statement

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

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

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.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.90B	1.86B	1.72B	1.43B	1.21B	1.13B
	Gross Profit
540.20M	533.00M	450.20M	344.90M	288.70M	293.60M
	EBIT
293.60M	281.40M	224.50M	160.80M	130.70M	131.40M
	EBITDA
339.50M	344.10M	283.10M	215.60M	171.60M	180.10M
	Net Income Common Stockholders
211.00M	216.30M	157.40M	120.40M	100.60M	96.20M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
57.50M	91.10M	61.00M	47.50M	40.50M	81.70M
	Total Assets
1.88B	1.77B	1.62B	1.52B	1.37B	1.21B
	Total Debt
305.20M	252.40M	320.70M	388.40M	313.70M	233.70M
	Net Debt
247.70M	161.30M	259.70M	340.90M	273.20M	152.00M
	Total Liabilities
677.00M	579.10M	618.60M	663.40M	582.10M	506.70M
	Stockholders Equity
1.20B	1.19B	1.00B	860.90M	784.00M	702.10M
Cash Flow		Free Cash Flow
198.90M	190.70M	164.10M	18.80M	64.40M	106.50M
	Operating Cash Flow
236.70M	231.30M	194.40M	71.80M	101.80M	136.20M
	Investing Cash Flow
-159.00M	-78.90M	-83.70M	-99.70M	-168.70M	-34.40M
	Financing Cash Flow
-68.80M	-121.00M	-97.90M	35.50M	26.40M	-53.40M

Federal Signal Technical Analysis

Technical Analysis Sentiment

Positive

Last Price100.46

Price Trends

50DMA

84.71

Positive

100DMA

86.84

Positive

200DMA

89.00

Positive

Market Momentum

MACD

3.72

Negative

RSI

74.95

Negative

STOCH

89.03

Negative

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 100.46 is above the 20-day moving average (MA) of 95.32, above the 50-day MA of 84.71, and above the 200-day MA of 89.00, indicating a bullish trend. The MACD of 3.72 indicates Negative momentum. The RSI at 74.95 is Negative, neither overbought nor oversold. The STOCH value of 89.03 is Negative, 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 (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FSS	78 Outperform	$6.05B	29.06	18.78%	0.52%	7.85%	15.78%
ZWS	78 Outperform	$6.14B	37.34	10.49%	0.96%	3.22%	38.39%
CECO	75 Outperform	$923.67M	20.23	18.34%	―	8.89%	278.44%
ATMU	74 Outperform	$3.01B	16.44	95.48%	0.41%	1.43%	12.88%
ERII	64 Neutral	$688.33M	34.66	10.35%	―	10.93%	6.99%
Sector *	62 Neutral	$760.74M	8.20	4.79%	3.79%	1.56%	-35.62%
PCT	38 Underperform	$1.77B	―	-67.71%	―	―	-180.10%

* Industrials Sector Average

Performance Comparison

FSS

Federal Signal

100.46

16.15

19.16%

CECO

Ceco Environmental

27.20

4.00

17.24%

ERII

Energy Recovery

12.72

-0.91

-6.68%

ZWS

Zurn Water Solutions

36.59

6.75

22.62%

PCT

PureCycle Technologies

10.82

5.16

91.17%

ATMU

Atmus Filtration Technologies, Inc.

36.58

7.43

25.49%

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.