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Axalta’s Big Deal with Volkswagen Group Italia

Peter Neil - Author

Jul. 17 2017, Published 11:43 a.m. ET

Axalta’s and Volkswagen in a new agreement

On July 10, 2017, Axalta (AXTA) and Volkswagen Group Italia signed a new three-year contract. According to the terms of the contract, Axalta’s three premium refinish brands—Cromax, Spies Hecker, and Standox—will be used in Volkswagen Group Italia’s Service partner network, which includes Audi, Skoda, Seat, and Volkswagen light commercial vehicles.

This deal should strengthen AXTA’s position in Europe. AXTA recorded nearly $1.5 billion revenues in fiscal 2016, with EMEA (Europe, the Middle East, and Africa) accounting for 36% of AXTA’s total revenue.

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Managing Director of Axalt Italy Marco Stefano Brioschi stated: “Axalta has a global contract with the Volkswagen Group in place, but we are delighted that the Volkswagen Group Italia has demonstrated its confidence in our premium brands’ refinish products and services by granting us separate approval at the national level.”

Axalta’s stock performance

For the week ended July 14, 2017, AXTA gained 2.6% and closed at $33.40, outperforming the iShares US Basic Materials ETF’s (IYM) returns of 2.5% during the same period. The gains in the stock have caused AXTA stock to trade at 5.5% above its 100-day moving average price of $31.65, indicating the upward trend in the stock.

YTD (year-to-date), AXTA stock has returned 22.8%. But analysts see a further upward trend in the stock and have indicated the target price of AXTA to be at $34.06. This implies a ~2.0% gain over its closing price of $33.40 on July 14, 2017.

Notably, IYM has 1.2% of its portfolio in AXTA. The top holdings of the fund include Dow Chemical (DOW), DuPont (DD), and Monsanto (MON), which had weights of 12.0%, 11.8%, and 8.3%, respectively, on July 14, 2017.


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