Atlas Copco Keeping Its Best-In-Class Position, But Markets Are Weakening

Given the long-term performance of Atlas Copco (OTCPK:ATLKY), I can understand why sell-side analysts look for excuses to get more positive on the name, and despite multiple data points of spreading weakness in multiple industrial end-markets, consensus EBITDA has risen about 7% in just the past three months. Even so, the shares have actually lost a little ground since my last update, dropping about 3% and lagging the industrial sector by about 6%, as some investors remain concerned about the high multiple in the face of likely peaking margins in the near term.

Atlas Copco acknowledged weakening trends in its industrial markets, and I'm comfortable with the general notion that, if the best companies are seeing weakness, it's worth listening to those warnings. I remain very positive on the long-term outlook for the business, but with the shares seemingly priced for only mid-single-digit long-term annualized returns, I don't see enough return to compensate for the risk.

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Atlas Copco Keeping Its Best-In-Class Position, But Markets Are Weakening