Finding the Signal Through the Noise in Europe: FSS NDR Takeaways

We hosted Jennifer Sherman (CEO), Ian Hudson (CFO) and Felix Boeschen (IR) from FSS for investor meetings in Europe this week. Management sounded confident in its ability to drive DD% revenue growth, including at least MSD-HSD% organic growth, supported by resilient end-market growth, annual pricing, and execution on strategic initiatives. Our understanding is that FSS's M&A pipeline remains solid in both ESG and SSG and we see plenty of opportunity ahead for FSS to build on its proven M&A track record. Management did not sound too concerned about potential softening of public funding and emphasized that its public funding revenue exposure is both highly diversified and resilient by design. Meetings also enforced our view that there are enough building blocks in place (aftermarket initiatives and New Way in particular) for FSS to continue to increase its EBITDA margin target range over time. We initiated coverage on 8/17 with a Buy rating, target price US$150.00 vs price US$112.17, exp