Baird Raises Knowles Stock Target Following Syntiant Deal

Baird's Optimistic Outlook on Knowles After Strategic Sale

Baird has recently raised its price target for Knowles Corp (NYSE: KN) shares to $25.00, up from the previous $20.00, maintaining an Outperform rating. This adjustment follows Knowles' significant decision to sell its Consumer MEMS Microphone (CMM) business to Syntiant Corp for $150 million, which offers $70 million in cash and $80 million in Syntiant preferred stock. This move has captured the attention of analysts, illustrating management's strategic abilities and fostering confidence in the company's future prospects.

The sale of Knowles' CMM business has been described as transformational and serves as a cornerstone for Baird’s favorable view on the stock. Analysts believe this transaction not only validates Knowles' management vision but also indicates their capacity to effectively execute strategies aligned with industry trends.

This pivotal step toward divesting the CMM business is anticipated to alter the focus of Knowles significantly, presenting opportunities to enhance its financial health. With the influx of cash and preferred stock, Knowles is expected to invest in new operational areas or enhance shareholder value.

Positive Implications of the CMM Business Sale

Baird's decision to adjust the price target reflects a positive outlook on Knowles’ overall valuation post-transaction. The CMM business sale aligns with their broader strategy and market positioning, reinforcing the company’s potential for sustained growth.

Noteworthy is the recent performance of Knowles Corporation, marking a substantial 18% increase year-over-year in revenues for Q2 2024, amounting to $205 million. This impressive growth is largely attributed to a remarkable 55% revenue leap in the Precision Devices segment, while the Medtech & Specialty Audio segment and the Consumer MEMS Microphone business saw growth of 4% and 9% respectively.

Financial Outlook and Strategic Developments

Following the CMM business sale, Knowles has revised its financial outlook. Third-quarter revenues from continuing operations are projected to range between $139 to $143 million, with non-GAAP diluted earnings per share expected to fall between $0.24 and $0.28. These forecasts indicate a positive trajectory for the company, reassuring investors of Knowles' growth potential.

In addition to financial updates, Knowles has achieved significant products development milestones. The company’s MIL-PRF-55681 capacitors successfully met the stringent standards set by the Defense Logistics Agency for defense and aerospace applications, gaining a spot on the U.S. Department of Defense's Qualified Products List. Such achievements underline Knowles' robust capabilities in catering to specialized industries.

Insights from InvestingPro

As Knowles Corp (NYSE: KN) navigates through its transaction with Syntiant Corp, real-time insights offer investors a broader perspective. For instance, management has actively engaged in share buybacks, which indicates their confidence in the company's future direction. Furthermore, the current valuation suggests a strong free cash flow yield, hinting at the company's potential to provide value for investors.

InvestingPro's data reveals Knowles has a market capitalization of approximately $1.58 billion. Despite encountering challenges reflected in a negative P/E ratio of -8.27, the firm has showcased a noteworthy revenue growth of 14.27% over the last twelve months as of Q2 2024. An 18.32% quarterly revenue increase in Q2 2024 presents a promising outlook for Knowles' financial performance.

With a gross profit margin of 38.15%, Knowles exemplifies operational efficiency. Though the company does not distribute dividends, analysts remain optimistic, predicting profitability for Knowles this year based on insightful tips from InvestingPro. By leveraging these insights, investors can make more informed decisions regarding their investments associated with Knowles Corp.

Frequently Asked Questions

What recent transaction involved Knowles Corp?

Knowles Corp recently sold its Consumer MEMS Microphone (CMM) business to Syntiant Corp for $150 million.

How did Baird respond to the sale?

Baird raised its price target for Knowles shares from $20.00 to $25.00 while maintaining an Outperform rating.

What financial growth has Knowles Corporation experienced?

Knowles reported an 18% increase in revenues year-over-year for Q2 2024, reaching $205 million.

What is Knowles' revised financial outlook for the third quarter?

The company estimates third-quarter revenues from continuing operations to be between $139 and $143 million.

What products developed by Knowles recently achieved recognition?

Knowles' MIL-PRF-55681 capacitors have met the Defense Logistics Agency's standards, earning a place on the U.S. Department of Defense's Qualified Products List.

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