UL Solutions Inc. Class A (ULS) AI Stock Analysis

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UL Solutions Inc. Class A

(NYSE:ULS)

71Outperform

UL Solutions Inc. shows a strong financial position with notable revenue and profitability growth, supported by strategic initiatives and expansions. Despite strong financials, the stock's high valuation and potential external headwinds, such as tariffs and currency fluctuations, present risks. Technical indicators suggest moderate strength, while the new executive appointment is seen as a positive strategic move.

Positive Factors

Earnings

Fourth-quarter results came in nicely above expectations, with top-line upside driving adjusted EBITDA margin and EPS above estimates.

Guidance

Management set the guidance to a level it has high confidence in delivering, and it is expected the company will at least hit the initial 2025 guidance targets.

Strategic Investments

ULS opened its large-scale battery testing lab in Michigan with a strong backlog of industrial battery testing projects, expecting activity to continue to increase and contribute to growth in 2025.

Negative Factors

Investor Sentiment

Shares trended modestly lower, attributed to heightened investor expectations and management's view that fourth-quarter results benefited from a pull-forward in demand ahead of looming tariff actions.

Segment Performance

Software & Advisory falls light. Segment revenue was $93M, +2.2% organically and light of management/our expectations on lower advisory work, but better software trends.

UL Solutions Inc. Class A (ULS) vs. S&P 500 (SPY)

Market Cap

$11.03B

Dividend Yield0.95%

Average Volume (3M)860.52K

Price to Earnings (P/E)33.8

Beta (1Y)0.66

Revenue Growth7.17%

EPS Growth25.35%

CountryUS

Employees14,813

SectorGeneral

Sector StrengthN/A

IndustrySpecialty Business Services

Share Statistics

EPS (TTM)1.63

Shares Outstanding62,049,274

10 Day Avg. Volume1,462,157

30 Day Avg. Volume860,525

Financial Highlights & Ratios

PEG Ratio1.33

Price to Book (P/B)N/A

Price to Sales (P/S)3.73

Price to Cash Flow (P/CF)20.60

P/FCF Ratio20.60

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$60.50

Price Target Upside13.98% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering6

UL Solutions Inc. Class A Business Overview & Revenue Model

Company DescriptionUL Solutions Inc. Class A (ULS) is a global safety science company that specializes in testing, inspection, and certification services. It operates across multiple sectors including consumer goods, industrial products, and environmental sustainability. The company focuses on ensuring product safety, improving quality, and facilitating compliance with regulatory standards, primarily through its core services of inspection and certification.

How the Company Makes MoneyUL Solutions Inc. makes money primarily through its testing, inspection, and certification services. The company charges fees for evaluating products against safety and regulatory standards, which is essential for manufacturers to gain market access in various regions. Key revenue streams include product testing services, certification, and inspection fees. Additionally, UL Solutions generates income through training and advisory services, helping companies navigate complex compliance landscapes. Strategic partnerships with industry leaders and government agencies enhance its service offerings and expand its market reach, contributing to its earnings.

UL Solutions Inc. Class A Financial Statement Overview

Summary

UL Solutions Inc. demonstrates strong financial performance with growth in revenue and profitability, effective cost management, and robust cash flow generation. The stable leverage and improved return on equity are positive, but increased debt levels should be monitored.

Income Statement

Positive

UL Solutions Inc. has shown solid growth in revenue with a notable increase from $2.678 billion in 2023 to $2.87 billion in 2024. The gross profit margin improved to 48.5% in 2024, indicating efficient cost management. Net profit margin increased to 11.4%, reflecting stronger profitability. The EBIT and EBITDA margins also showed improvement, indicating operational efficiency. Overall, the income statement highlights a positive growth trajectory and improved profitability.

Balance Sheet

Positive

The company's balance sheet reflects a stable financial position with a debt-to-equity ratio of 1.03, indicating moderate leverage. The equity ratio of 32.3% suggests a balanced capital structure. Return on equity improved significantly to 36.1%, showcasing effective use of shareholders' equity to generate profit. Although the balance sheet is stable, the increase in total debt warrants attention for potential risk management.

Cash Flow

Positive

Cash flow analysis shows healthy free cash flow growth from $252 million in 2023 to $287 million in 2024. The operating cash flow to net income ratio is strong at 1.61, indicating efficient cash generation relative to net income. The free cash flow to net income ratio is 0.88, suggesting effective conversion of earnings into free cash flow. The company demonstrates robust cash flow management, supporting its operational and strategic initiatives.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
2.87B	2.68B	2.52B	2.52B	2.30B
	Gross Profit
1.39B	1.28B	1.21B	1.18B	1.03B
	EBIT
462.00M	368.00M	412.00M	287.00M	363.00M
	EBITDA
462.00M	535.00M	535.00M	417.00M	481.00M
	Net Income Common Stockholders
326.00M	260.00M	293.00M	224.00M	231.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
298.00M	315.00M	373.00M	1.38B	971.00M
	Total Assets
2.80B	2.74B	2.72B	3.66B	3.55B
	Total Debt
935.00M	1.06B	660.00M	154.00M	119.00M
	Net Debt
637.00M	748.00M	338.00M	-1.17B	-852.00M
	Total Liabilities
1.87B	2.06B	1.64B	1.33B	1.28B
	Stockholders Equity
904.00M	654.00M	1.05B	2.31B	2.25B
Cash Flow		Free Cash Flow
287.00M	252.00M	208.00M	314.00M	368.00M
	Operating Cash Flow
524.00M	467.00M	372.00M	421.00M	487.00M
	Investing Cash Flow
-234.00M	-175.00M	-238.00M	178.00M	-344.00M
	Financing Cash Flow
-284.00M	-294.00M	-1.12B	-228.00M	-20.00M

UL Solutions Inc. Class A Technical Analysis

Technical Analysis Sentiment

Positive

Last Price53.08

Price Trends

50DMA

53.97

Positive

100DMA

52.74

Positive

200DMA

50.87

Positive

Market Momentum

MACD

0.93

Negative

RSI

72.05

Negative

STOCH

88.40

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ULS, the sentiment is Positive. The current price of 53.08 is below the 20-day moving average (MA) of 54.46, below the 50-day MA of 53.97, and above the 200-day MA of 50.87, indicating a bullish trend. The MACD of 0.93 indicates Negative momentum. The RSI at 72.05 is Negative, neither overbought nor oversold. The STOCH value of 88.40 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ULS.

UL Solutions Inc. Class A Risk Analysis

UL Solutions Inc. Class A disclosed 104 risk factors in its most recent earnings report. UL Solutions Inc. Class A 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

UL Solutions Inc. Class A Peers Comparison

Overall Rating

UnderperformOutperform

Sector (54)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
UNF	72 Outperform	$3.09B	21.52	7.17%	0.84%	5.04%	31.69%
RTO	71 Outperform	$10.02B	28.02	7.44%	2.57%	3.96%	-17.48%
ULS	71 Outperform	$11.03B	33.84	41.85%	0.95%	7.17%	25.35%
CBZ	69 Neutral	$4.11B	70.03	3.19%	―	13.97%	-54.48%
ABM	66 Neutral	$2.82B	35.73	4.46%	2.23%	2.81%	-67.57%
ARMK	60 Neutral	$8.10B	24.08	11.46%	1.32%	-5.98%	-46.55%
Sector *	54 Neutral	$4.01B	-18.30	-14.99%	6.62%	25.52%	-80.16%

* General Sector Average

Performance Comparison

ULS

UL Solutions Inc. Class A

55.11

20.47

59.09%

ABM

ABM Industries

45.30

2.43

5.67%

CBZ

CBIZ

76.12

1.79

2.41%

UNF

UniFirst

173.11

12.24

7.61%

ARMK

ARAMARK Holdings

33.97

2.37

7.50%

RTO

Rentokil Initial

21.80

-6.40

-22.70%

UL Solutions Inc. Class A Earnings Call Summary

Earnings Call Date: Feb 20, 2025 | % Change Since: -4.26% | Next Earnings Date: May 26, 2025

Earnings Call Sentiment Positive

The earnings call reflected a strong performance in 2024 with significant revenue growth and strategic expansions. Despite potential headwinds from tariff-related activity and currency fluctuations, the company's robust financial health and strategic investments position it well for continued growth.

Highlights

Record Revenue Growth

UL Solutions delivered revenues of $2.9 billion in 2024, up 7.2% versus 2023 and 8.7% on an organic basis. The Industrial segment led with 9.4% growth, including an 11.9% organic increase.

Strong Financial Performance

Adjusted EBITDA for the full year grew 16.5%, with a margin expansion of 190 basis points. Adjusted net income increased by 18.8%, and free cash flow was $287 million for the year.

Successful IPO and Strategic Acquisitions

UL Solutions completed its IPO in April and a follow-on offering in September. The company made strategic acquisitions, including BatterieIngenieure and TesTneT, to support global energy transition efforts.

Continued Expansion and Investment

Opened a state-of-the-art battery testing lab in Auburn Hills, Michigan, expanded capacity in Mexico, and announced plans for an advanced automotive testing center in Korea. $237 million was reinvested in capital expenditures.

Lowlights

Potential Normalization in Industrial Growth

While the Industrial segment achieved 13.9% organic growth in Q4, there is an expectation of normalization in demand for ongoing certification services in 2025.

Impact of Tariff-related Activity

Increased activity in ongoing certification services possibly due to manufacturers anticipating tariffs, which could result in slightly lower growth in 2025 if demand was pulled forward.

Currency Headwinds

A potential 1% revenue headwind in 2025 due to currency fluctuations, mostly offset by expense reductions, but still impacting overall revenue.

Company Guidance

During the UL Solutions Fourth Quarter 2024 Earnings Call, CEO Jenny Scanlon and CFO Ryan Robinson presented a robust financial performance for the year, with key metrics highlighting substantial growth. UL Solutions reported a 7.2% increase in revenues, reaching $2.9 billion, and an 8.7% rise on an organic basis compared to 2023. The Industrial segment led the way with a 9.4% growth, including 11.9% organically, while the Consumer segment saw a growth of 5.6%, with 6.9% on an organic basis. The Software & Advisory segment experienced a 5% growth, with 4.4% organically. Adjusted EBITDA grew by 16.5%, with a margin expansion of 190 basis points, and adjusted net income rose by 18.8%, resulting in $287 million of free cash flow. Moreover, the company executed strategic capital allocation, including $237 million in capital expenditures and $100 million in dividends, while maintaining an investment-grade balance sheet. Looking forward, UL anticipates mid-single-digit organic revenue growth and an adjusted EBITDA margin of approximately 24% for 2025, driven by ongoing industry megatrends such as the global energy transition and digitalization.

UL Solutions Inc. Class A Corporate Events

Executive/Board Changes

UL Solutions Inc. Announces Board of Directors Changes

Neutral

Feb 14, 2025

On February 11, 2025, UL Solutions Inc. announced changes to its board of directors, with Lisa Lambert deciding not to stand for re-election and Frank Coyne not being nominated due to the board’s retirement policy. The company intends to nominate Vikram Kini, CFO of Ingersoll Rand Inc., for election to the board. These changes will reduce the board size from 13 to 12 members, as decided by the board.

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.