NPKI modestly tops consensus in 1Q 2026 & raises the high-end of full-year 2026E guidance; announces plans to invest an incremental $40-$45 million toward a ~50% expansion in manufacturing capacity, which should come on-line in mid-2027; fair value estimate increased to ~$17.50 per share

Last night, after the market close, NPK International (NYSE: NPKI) reported 1Q 2026 results with sales from continuing operations up ~16% to $75.1 million (versus consensus of $73.3 million), driven by strength in demand for rentals of its core-composite matting products (particularly among utility & critical infrastructure customers), which were up ~20% to $52 million during the March-quarter. Adj. EBITDA increased ~14% to $22.5 million (compared with consensus of $20.6 million) while adj. EPS were $0.12 (compared with consensus of ~$0.11 and $0.11 in the prior year period).

The company ended 1Q 2026 with net debt of $4.0 million (compared with ~$12 million at the end of 2025), including ~$6.5 million of cash and ~$11 million of debt.  During the quarter the company repurchased 0.2 million shares for $2.7 million.  [Recall, during 2025, NPKI repurchased ~4% of its shares (at an implied price of ~$6.70 per share), as well as completed the $42 million acquisition of U.K.-based Grassform, which operates a composite mat fleet of ~20,000 (and generated ~$2 million of sales in 4Q 2025), in late-November 2025.]

On the longer-term capital allocation front, management indicates that given the health of its balance sheet (and durability of its demand outlook) the company will continue to return capital to shareholders, invest in expanding its current matting fleet (where the cash-on-cash returns have historically been ~25%-plus) as well as evaluate small tuck-in acquisitions within its core critical infrastructure markets. 

In that context, the company announced its intention to invest $40-$45 million over the next five quarters to expand its manufacturing capacity by ~50%, which should begin to come online in mid-2027.  To be sure, this level of incremental spend, albeit a long-term good/necessity, is likely to cause a degree of near-term investor angst we would note that, on this morning’s conference call, management downplayed the medium-term impacts on either financial returns (i.e., ROIC) or utilization (and that the additional capacity likely sets the company up to support solid growth through the end of the decade).

In terms of guidance (see Exhibit 1 on page 2), management raised the high-end of its full-year 2026E outlook, which now calls for sales of $310-$325 million (previously $305-$325 million and compares with prior consensus of $316 million), implying ~15% year-over-year growth at the mid-point, with adj. EBITDA of $92-$102 million (up from $88-$100 million and compared with consensus of ~$92.5  million), implying ~28% growth.

Full-year 2026E capital expenditures are expected to be $75-$90 million (up from $45-$55 million), including $30-$35 million of the incremental manufacturing capacity investment aimed at capitalizing on what management describes as a “a multi-year capital cycle” for its utility customers as well as “sustained market conversion from timber to composite”.  (Notably, on this morning’s conference call management anecdotally indicated that composite solutions currently have ~25% market share with timber & stone remaining the dominant, albeit legacy, solutions, in our view.)

Our base case fair value for NPKI (formerly NR) moves to $17.50 based on a 13.5x multiple of 2027E adjusted EBITDA and accounting for projected net debt.  [Note: NPKI changed its corporate moniker from Newpark Resources (old ticker NR) in December 2024 following the sale of its Fluid Systems (or oil field services) business and, subsequently, in late-May 2025 changed its Global Industry Classification Standard (GICS) classification to Industrials/Capital Goods/Trading Companies & Distributors (from oil field services).]

PCS Research Group welcomes and encourages your feedback.  Please feel free to call us if we can be of service.

Close Coverage of Post-Spin Qnity (Q) with Shares Trading Roughly In-Line with our FVE, Effective as of Today’s Market Close

For context, following our initial BUY rating shares of post-spin Qnity Electronics (NYSE: Q) appreciated 48.5% (outperforming the S&P 500 and Russell 2000 indexes by 44% and 36%, respectively).

That said, with shares trading roughly in-line with our current $140.50 per share (see Exhibit 3 on page 3) fair value estimate (FVE) as well as the span of time that has elapsed since the company’s tax-free separation from DuPont de Nemours (NYSE: DD), which was completed on November 1, 2025, we will drop coverage, effective as of today’s market close. 

Simply for reference, for full-year 2025, consolidated sales rose ~10% to $4.75 billion with adj. EBITDA up ~11% to $1.4 billion.  Adj. EPS were $3.35 (versus $2.98 in 2024).

On the guidance front, for 2026E, management’s initial guidance (see Exhibit 1 on page 2) calls for consolidated sales of $4.97-$5.17 billion along with adj. EBITDA and EPS of $1.465-$1.575 billion and $3.55-$3.95, respectively.  Free cash flow is projected to be $450-$550 million on a capital spending budget of ~$450-$470 million (or ~9% of consolidated sales).   Q’s Board has also approved a $500 million repurchase program (representing ~2% of the outstanding shares at current price levels).

In terms of the medium-term financial outlook (i.e., 2025E-2028E; see Exhibit 2 on page 2), Qnity targets compound annual organic growth of ~6%-7%, or roughly 200 basis points above the underlying market,  driven by share/content gains, a higher-value mix shift toward areas such as semiconductor fabrication (or “semi fab”) consumables, advanced packaging & interconnects as well as thermal management, along with an adjusted EBITDA CAGR of ~7%-9% (see Exhibit 2 on page 2). 

Please see The Spin-Off Report dated October 8, 2025 and Updates from 10/16/2025, 11/3/2025, 11/6/2025, 1/15/2026 and 2/25/2026 for more information.

GTX tops consensus in 1Q 2026 and raises the high-end of full-year 2026 guidance w/ the mid-point of its FCF outlook implying a 10.5%yield; still sees the non-auto business ramping in 2027 with Industrial E-Cooling solutions comprising >5% of total sales by 2030; FVE increased to $23.50 per share

This morning, before the market open, GTX reported 1Q 2026 sales up 12% (or ~6% on a constant currency basis) to $985 million (versus consensus of ~$913 million) driven by continued share gains in the light vehicle gasoline space as well as increased in-roads into the commercial vehicle (both on- & off-highway) and industrial sectors. Adj. EBITDA rose ~15% to $183 million (on 50 bps of margin expansion to 18.6%) while adj. free cash flow (FCF) was $49 million. GAAP net income improved 53% to $95 million (on a margin of 9.6%, up 250 bps) while EPS were $0.49 (versus consensus of $0.41).

On the capital allocation front, GTX repurchased an additional $87 million worth of its stock during the quarter (and has $163 million reaming on its full year authorization, representing ~4% of the outstanding total shares).  Additionally, the company maintained its $0.08 per share quarterly dividend payout to shareholders (which, we note, was increased from $0.02 per share in 3Q 2025).

At quarter end, GTX’s net leverage ratio was 1.92x (compared with 1.92x at the end of 2025 and 2.21x at the end of 2024); notably, the company has no significant debt maturities until 2032.  The company’s near-term leverage target remains ~2.0x (as it is balanced against its commitment to returning ~75% of adj. free cash flow to shareholders).

In terms of guidance, the company raised the high-end of its full-year 2026E outlook (see Exhibit 1 on page 2), which now calls for total sales of $3.6-$3.9 billion (previously $3.6-$3.8 billion) with adjusted EBIT of $520-$600 million (versus prior guide of $520-%570 million). GAAP net income is expected to be $300-$360 million (up from $295-$335 million). Cash flow from operations is projected to be $407-$522 million (previously $407-$502 million), resulting in adj. free cash flow (FCF) of $355-$475 million (compared with the prior outlook of $355-$455 million).  [Note: at the midpoint, management’s FCF outlook implies a current yield of ~10.5%, by our calculation; see Exhibit 2 on page 2). For context, GTX’s revised guidance is based on underlying macro assumptions that are broadly unchanged from what was discussed on the 4Q 2025 conference call.

Recall, looking into 2027, the company recently announced the launch of a strategic collaboration with Trane Technologies (NYSE: TT), a global HVAC supplier that was spun-off from Ingersoll-Rand and merged with Gardner Denver in an RMT transaction in 2020, to integrate GTX’s “next generation, oil-free, high-speed centrifugal compressors” into TT’s HVAC offerings ranging from “unitary rooftop and modular chillers to large capacity chillers”, which incorporate products/technologies originally developed by GTX for automotive applications (i.e., high-efficiency turbomachinery, oil-free bearings, high-speed electric motors, ultra-high frequency inverters & model-based control software) but that are now being further utilized in a wider range of industrial applications (i.e., data centers).

In terms of tangible results, early testing suggest GTX’s solutions can help TT generate/offer “real world energy savings” of more than 10% (as compared with incumbent solutions).  On the financial front, management expects the collaboration to ramp moving into 2027 and could ultimately comprise ~5% of total revenue by 2030 (with activities being immediately accretive upon production).

More recently, on this morning’s conference call, the company noted inroads into both E-Powertrain solutions, particularly in China, as well as a “significant” production award from Tonfy, a China-based battery energy storage player, for its E-Cooling Compressor products, which should contribute looking into 2027.

All told, GTX endeavors to generate ~$1 billion in so-called “Zero-Emission” sales by 2030 (at stable corporate margins); in that context, the company intends to hold an Investor Day on May 20, 2026 to “provide additional updates on our long-term strategy and outlook”.

Our base case fair value estimate for GTX is $23.50 per share, reflecting a 9.0x multiple on our 2028E adjusted net income forecast and a fully diluted share count of ~161 million (see Exhibit 3 on page 3).

LXFR reports 1Q 2026 results; modestly raises full-year EPS guidance and indicates a material acceleration to “robust double-digit earnings growth” looking into 2027; fair value remains $16.50 per share

Last night, after the market close, LXFR reported 1Q 2026 consolidated sales, ex-Graphic Arts, down ~7.5% to ~$84 million (versus consensus of $84.5 million) with adjusted EBITDA up ~9% to $12.3 million (compares with consensus of $11.5 million).  Adj. EPS increased ~17.5% to $0.27 (versus consensus of $0.20).

The company ended the March quarter with net debt of ~$43 million, including ~$15 million of cash and debt of ~$58 million, and a leverage ratio less than 1.0x.

In terms of financial guidance, management raised its full year 2026E guidance calling for consolidated sales of $355-$370 million (compared with the prior outlook of $350-$370 million and consensus of $360 million) with adjusted EBITDA of $52-$56 million (versus the previous guide of $50-$55 million and consensus of ~$50 million).  Adjusted EPS is projected to be $1.12-$1.22 (up from $1.05-$1.20 and compared with consensus of $1.12) while adj. free cash flow (FCF) is still expected to be $20-$25 million (see Exhibit 1 on page 2).

Anecdotally, looking into 2027E management indicated that given favorable end market trends (along with improving visibility), particularly in defense and aerospace sectors, as well as its internal cost/operational initiatives, including plant consolidations, the company expects to drive “robust double-digit earnings growth” in 2027.

Additionally, the company also remains cognizant that the Gas Cylinders and Elektron businesses have “no material synergies” and it is committed to continuously evaluating market conditions for opportunities to unlock value.

Our base case fair value estimate for LXFR remains $16.50 per share, reflecting a ~9.0x multiple on 2026E adj. EBITDA as well as projected net debt (see Exhibit 2 on page 2).

KOG Completes the Spin-Off of Kongsberg Maritime; Initially Rate Both Spin Entities at NEUTRAL

On April 22, 2026, after the market close, Kongsberg Gruppen ASA (KOG NO) completed the tax-exempt demerger of its Maritime business, Kongsberg Maritime, which will begin trading as a standalone concern on the Oslo Stock Exchange under the ticker KMAR NO as of today, April 23^rd.  Shareholders of record received shares of each entity on a one-for-one basis (with no cash consideration). [Note: based on last night’s closing price, the reference prices, used as a technical guide for initial trading, were set at NOK 307.20 and NOK 67 for RemainCo and SpinCo., respectively, implying a roughly 82%/18% split, in terms of equity value.]

The separation effectively disentangles two businesses with fundamentally different economic characteristics, enabling a clearer alignment among strategy, management focus, capital allocation, and valuation. Post separation, Kongsberg will emerge as a more focused defense & advanced technology platform, while Kongsberg Maritime will operate as a standalone, somewhat more cyclical marine solutions provider. More specifically, Kongsberg Maritime, for its part, will be positioned as a leading provider of advanced marine systems with exposure to offshore-, naval-, and merchant- end markets. While supported by a sizable installed base and stable long-term demand trends, the business remains decidedly more cyclical/lumpy as well as capital-intensive (as compared to the former parent), with valuation upside likely to be more gradual/execution dependent, particularly in regard to operating leverage-driven margin expansion, an improving aftermarket mix, and the normalization of standalone cost structures, which will be key to driving incremental value over time rather than as a significant near-term re-rating catalyst. By contrast, RemainCo will retain Kongsberg’s Defence & Aerospace and Discovery businesses and emerge as a more concentrated defense platform, aligned with structural growth drivers such as rising global defense spending and increasing demand for advanced systems (e.g., missiles, air defense/drones & combat solutions). To be sure, strong backlog visibility, long-cycle contracts, and high barriers to entry support a more resilient earnings profile and justify a premium valuation relative to peers.

Clearly, given the share price performance post spin announcement, where shares advanced ~58% (compared with the a ~26% advance in the Oslo All-Shares Index), there has been a degree of pull-forward in terms of the re-rating process, particularly, as we see, at RemainCo, which obviously represented the bulk of the pre-spin equity value.  That said, the market, at this juncture, does seem to be pricing-in a premium multiple looking out to 2030E forecasts.  All told, on a post spin basis, we value RemainCo at NOK 324 per share and NOK 71 per share, respectively.  Given the implied upside to our forecasts, we initially rate both post-spin entities, Kongsberg Gruppen (KOG NO) and Kongsberg Maritime (KMAR NO) at Neutral (see Exhibit 1).   

In terms of near-term trading dynamics, given the obvious disparity in equity values (~NOK 285 billion versus ~NOK 62.5 billion), and KOG’s inclusion in, among other the OBX Index as well as the OBX Industrials Index, as well as our sense that investor appetite likely skews toward RemainCo’s defense positioning (as opposed to pure-play maritime exposure), a degree of shareholder rotation could be expected (Note: Folketrygdfondet at ~5.35%, BlackRock, Inc. at ~3.50%, and Must Invest AS at ~2.53% are the company’s top “independent” shareholders).  That said, a notable mitigating/stabilizing factor in our view is the Norwegian government which, via the Norwegian Ministry of Trade, Industry & Fisheries, holds a controlling stake of approximately 50.004% and has indicated its intent to maintain its current stakes in post-spin KOG and KM.  For its part, Kongsberg Maritime was added to the S&P Europe 350 and the S&P Euro Plus indices as of today’s market open (replacing Zealand Pharma).

ABF to Separate its Retail Business, Primark, from its Food Business via a Dividend Demerger that is Expected to be Completed by the end of 2027

On April 21, 2026, Associated British Foods plc (ABF LN) announced that following a strategic review, which began in November 2025 (when the company was added to The ESS Monthly Situation Monitor), the company intends to separate its Retail business, named Primark (or SpinCo), from its Food business (or FoodCo). The transaction, which is supported by majority shareholder Wittington Investments (who intends to maintain its position in both entities), is expected to be completed via a dividend demerger by the end of calendar 2027, subject to customary conditions.  (While the ultimate deal structure may evolve these types of demergers are generally aimed at being a tax-neutral event for shareholders.)  Both companies are expected to trade on the London Stock Exchange and remain components of the Financial Times Stock Exchange (FTSE) 100 index.

Currently, ABF operates five segments: (1) Retail (Primark) (49% of 2025 revenue), a fast-growing international value clothing and fashion retailer in Europe; while its Foods business is comprised of (2) Grocery (21% of 2025 revenue), a global food business division comprising a wide portfolio of international and regional brands; (3) Ingredients (11% of 2025 revenue), comprising bakery ingredients, along with specialty value-added ingredients primarily focused on enzymes, precision extraction, health and nutrition and pharmaceutical delivery systems; (4) Sugar (11% of 2025 revenue), comprising a range of sugar and other products from sugar cane and sugar beet in Africa, UK and Spain; and (5) Agriculture (8% of 2025 revenue), comprising an international agri-food business producing specialty feed ingredients, premix & compound animal feed alongside an integrated dairy business in the UK.

While these food divisions provide earnings diversification and strong cash generation, their growth and return profiles contrast sharply with Primark’s expanding international footprint and superior returns on capital.  In that context, the divergence in segment performance was notably stark in 2025 (and seemingly prompted management’s review of its group structure) with Retail segment sales growing ~1% year-over-year while the Grocery and Ingredients divisions saw revenue declines of 3% and 4%, respectively. The Sugar division experienced a sharper 10% revenue contraction driven by weak European sugar pricing while Agriculture revenue fell by 1%, reflecting lower joint-venture contributions and one-off costs.

On the Retail front, Primark remains one of the largest and fastest-growing clothing retailers in Europe and the market leader by volume in the UK. In 2025, the business operated 473 stores (currently 486) with ~19.5 million square feet of selling space across 17 countries, reflecting its continued international expansion efforts. As mentioned earlier, Primark delivered another year of solid financial performance in 2025 with revenue increasing to £9.6 billion (from £9.4 billion 2024). Profitability remained strong with an adjusted operating profit margin of 11.9% (versus 11.7% in 2024) and a return on capital employed (ROCE) of 19.1% (compared with 18.7% in 2024). Overall, Primark’s sales grew 1% during the year with its store rollout program contributing 4% to sales growth, supported by continued progress in key expansion markets across Europe and the US, albeit partially offset by a 2.3% decline in like-for-like sales, reflecting softer operating conditions in some of its more mature markets.

On the Food side, sales at Grocery fell ~3% to £4.125 billion (versus £4.24 billion in 2024) with an operating margin of 11.6% (compared with 12.1% in 2024) and a return on capital employed (ROCE) of 31.5% (versus 35.8% in 2024) while Ingredients posted a ~4% top-line decline to ~£2.04 billion (versus £2.13 billion in 2024) with an adj. operating margin of ~12.6% (compared with 10.9% in 2024) and an ROCE of 17.9% (versus 16.9% in 2024).  At Sugar, sales fell 12% (or 10% on a constant currency basis) to £2.05 billion (versus £2.32 billion in 2024) with an adj. operating margin loss of -0.1% (compared with a 9.1% gain in 2024) and a similar return on capital employed (ROCE) versus 10.9% in 2024 while at Agriculture sales were down ~2% (or ~1% on a constant currency basis) to £1.6 billion (versus £1.65 billion in 2024) with an adj. operating margin 1.6% (compared with a 2.5% in 2024) and a ROCE of 4.8% (versus ~8% in 2024).

In terms of guidance, ABF expects group “adjusted operating profit and EPS to be below last year”, reflecting relatively challenged trends at both the Retail and Food segment trends.  By segment, at Retail, management expects 4%-5% top-line growth, driven primarily by new store openings, with an operating margin of ~10% (down from 11.9% in 2025) while at Food management expects operating profit ay Grocery, Ingredients & Agriculture to be “moderately below” 2025 levels while Sugar is expected to deliver an operating loss in 2026 (compared with previous commentary suggesting the potential for a small profit on an annual basis).

On valuation, the most relevant peers of ABF’s Retail segment are Hennes & Mauritz AB-B SHS (HMB SS), Industria de Diseno Textil (ITX SM), Next PLC (NXT LN), OVS SpA (OVS IM) and Lindex Group OYJ (LINDEX FH), which trade at a median 2026E EV/EBIT multiple of 14x. Applying this multiple to the segment’s 2026E EBIT of ~£1.075 billion implies an enterprise value of ~£15 billion. Meanwhile, the packaged food business, which constitutes the Ingredients and Grocery segment could be compared to Tate & Lyle PLC (TATE LN), Nestle SA-Reg (NESN SW), Corbion NV (CRBN NA) and Danone (BN FP) while the Sugar and Agriculture segments could be compared to Suedzucker AG (SZU GR), Genus PLC (GNS PLC) and Schouw & Co (SCHO DC).  Applying the overall group average of ~11x to 2026E EV/EBIT to the segment’s 2026E EBIT of ~$525 million yields a value of ~£5.5 billion.

After accounting for a net debt of ~£3.0 billion as well as minority interests & pension liabilities, the preliminary sum-of-the-parts equity value amounts to roughly £16.0 billion or ~£22 per share.

Close Coverage of BOS, effective as of today’s market bell

We close coverage of AirBoss of America (TSE: BOS), effective as of today’s market close.

As always, we will continue to monitor the shares for an opportunity to re-recommend if valuation shifts or other potential strategic alternative options materialize. 

Close Coverage of RICK, effective as of today’s market bell

We close coverage of RCI Hospitality Holdings (NASDAQ: RICK), effective as of today’s market close.

As always, we will continue to monitor the shares for an opportunity to re-recommend if valuation shifts or other potential strategic alternative options materialize. 

FDXF Holds its Inaugural Investor Day; Targets “Medium-Term” Growth in Sales & Adj. EBIT of 4%-6% & 10%-12%, Respectively, w/ ~$1 Billion of Annual FCF Generation; FVE Raised to $435 per share (from $429.50 per share), Maintain Pre-Spin BUY

On April 8, 2026, FedEx Corporation (NYSE: FDX), which expects to complete the tax-free spin-off of its Freight (or LTL) business on June 1^st, held an investor event specifically focused on SpinCo, which will be dubbed FedEx Freight Corporation, and trade on the New York Stock Exchange (NYSE) under the ticker “FDXF”.

In terms of a baseline (see Exhibit 1), FDXF, which will be the industry’s largest standalone LTL carrier by sales, expects to generate F2026E sales of ~$8.7 billion, split roughly 60%/40% between priority & economy, with GAAP EBIT of $600 million and adj. operating income of ~$1.1 billion, implying a margin of ~12% (although, the inclusion of standalone corporate costs likely presents a ~50 basis point near-term headwind for F2026E). 

Looking to the medium-term (see Exhibit 2), management expects ~4%-6% top-line growth (with yield modestly outperforming volume growth of ~1%-2%), which along with cost controls & operating leverage should drive operating income (EBIT) growth of 10%-12% (toward an adj. margin of ~15%, implying ~300 basis points of margin improvement and incrementals in the mid-to-high 20%s, by our calculation), which we note still leaves the company well-below best-in-class peer, ODFL, but roughly in-line with XPO). 0Capital expenditures are expected to be ~5% of sales, of which 45% will be deployed to equipment with 25% each for facilities & technology (and remainder classified as “other”).  Free cash flow (FCF) conversion is expected to exceed 90%, implying roughly ~$1 billion of annual FCF generation, which will be deployed towards achieving a leverage ratio of ~2.5x or below within 12-months of the transaction’s completion.  As well, the company intends to maintain an investment grade credit rating and is likely to institute a dividend (looking into 2027E) while share repurchases, at least initially, will largely be aimed at offsetting dilution.  On the longer-term horizon, FDXF will consider strategic M&A on an opportunistic basis.  Notably, management’s forecasts are not dependent on an overall market rebound, but in terms of target markets the company intends to focus on making further inroads in several nascent verticals, including higher-margin small- & medium sized businesses (SMB) as well the ~$6 billion healthcare market and the grocery and data center segments, which represent ~$1 billion and $2 billion opportunities, respectively.

Anecdotally, while acknowledging that yesterday’s LTL event indicated an outlook that was above our initial forecasts, prompting a modest increase in our fair value estimate (i.e., $68 from $64 per share), and the stock outperformed the market (i.e., 4.6% versus a 2.51% rise in the S&P 500 and a 2.97% increase in the Russell 2000) it was, in our estimation, as a whole, somewhat underwhelming in the sense that we had expected the company would provide a more granular roadmap on how to not simply get back to what we view as a solid but still broadly average level of profitability, at least on a relative basis (i.e., not the map to a 15% operating margin but to 20% and above would have been our preference.)  That said, management did, at least anecdotally, indicate the possibility of “significant upside” to profitability over the long-term, supported by the goal of capturing $0.50 of operating income from every $1 of gross profit generated.

Please see the Spin-Off Report dated April 6, 2026 for more information as well as the Reference section on pages 4-9.

Aptiv Completes the Spin-Off of Versigent; Initially Rate Post-Spin APTV at BUY and VGNT at NEUTRAL

Distribution: On April 1, 2026, before the market open, Aptiv PLC (NYSE: APTV), a Dublin-based global auto supplier, completed the tax-free spin-off of 100% of its Electrical Distribution Systems (EDS) business, Versigent (NYSE: VGNT).  Shareholders of record, as of March 17^th, received one share of VGNT for every three shares of APTV owned (i.e., a 1-for-3 distribution ratio).

Regular-way Trading and Indexation: Shares of VGNT (as well as post-spin APTV) will commence so-called “regular-way” trading as of this morning’s market open (4/1).  Pre-spin APTV is a member of the S&P 500 Index and will remain so following this transaction (although we note that based on our initial projections, which suggest a sub-$20 billion market cap, its potential removal at some point in the future could present some degree of an overhang for certain investors).  On the other hand, post-spin VGNT, will not be included in the S&P 500 Index but rather join the S&P SmallCap 600 Index (replacing Titan International) effective prior to the market open on April 2, 2026. To that end, it seems reasonable to suggest, there will be a degree of initial shareholder rotation/selling pressure, particularly considering that the so-called “Big 3” passive investors (i.e. Vanguard, BlackRock, and State Street) collectively own ~54.5 million shares or ~25.5% of the shares (and the pre-spin average daily trading volume was ~3.2 million shares). 

When-Issued Trading: For perspective, in the so-called “when-issued” trading market Versigent (VGNT-W) opened at $30 per share on March 27^th (3/27) before closing at $30.20 per share (on volume of less than 3K shares).  In subsequent days, shares were relatively steady around $30-$31 per share (on average volume of 45.5K shares per day) before closing last night (3/31) at $31.85 per share.  For its part, APTV-W both opened and closed on 3/27 at $58 per share (on volume of ~11.5K shares) before closing last night at $58.50 per share.

Initial Guidance: For FY 2026E, management has guided RemainCo’s (i.e., New Aptiv) sales in the range of $12.8-$13.2 billion, implying adjusted growth of ~4%. This outlook reflects modest global vehicle production assumptions supplemented by continued content expansion in advanced driver assistance systems (ADAS), centralized computing, and electrification components. The company expects EBITDA of $2.36-$2.48 billion, corresponding to an EBITDA margin of 18.6%. This margin profile reflects the inherently higher value-added nature of its engineering-intensive and software-aligned product mix. Earnings per share (EPS) guidance is $5.70-$6.10 (based on an 18.5% tax rate).  Over the medium term, management estimates sustained mid-single digit top-line growth supported by increasing adoption of centralized vehicle architectures, growth in ADAS penetration, expansion of software-enabled features, and continued tailwinds for electrification. EBITDA margins are expected to increase by 200bps by FY 2028E, driven by favorable mix shifts toward software-enabled solutions, platform standardization, engineering productivity, and operating leverage as program volumes scale. Free cash flow (FCF) is expected to be $650-$850 million in FY 2026E.  [Note: this guidance is net of $250 million of separation-related cash costs associated with the EDS transaction to be settled in FY 2026E, as well as an additional $200 million investment in building its semiconductor inventory.]  Post spin-off, RemainCo is expected to pursue a balanced and disciplined capital allocation framework anchored around maintaining an investment-grade balance sheet with a targeted gross leverage ratio of 2.0x-2.5x. The company intends to prioritize reinvestment in high-return organic growth initiatives, particularly across software-enabled, computing-intensive and electrification platforms, while selectively pursuing strategic acquisitions to enhance scale and diversification. With cumulative free cash flow (FCF) generation of ~$4 billion projected over FY 2026–2028E, excess cash beyond reinvestment requirements is earmarked for shareholder returns, primarily through share repurchases, reflecting a calibrated approach between funding growth and returning capital (see Exhibit 2).

As it relates to SpinCo (i.e., Versigent), management expects to generate EBITDA of $950-$1,030 million in FY 2026E, corresponding to an EBITDA margin of ~10.7%. The company’s expense base remains heavily weighted toward materials & manufacturing (~80% of revenue), with engineering (~3%) and SG&A (~6%-7%) representing smaller but more controllable levers. By FY 2028E, management targets EBITDA margins approaching ~12%, reflecting substantial performance improvements via engineering-led design optimization, vendor negotiations, manufacturing footprint consolidation & rotation into best-cost countries, and increasing automation across its cutting, crimping, and wire assembly processes. Engineering productivity gains through digitalization and resource consolidation are also expected to support operating leverage, partially offset by ongoing investments in electrification and adjacent growth initiatives.  From a cash flow perspective, Versigent is guiding to $200–$300 million of free cash flow (FCF) in FY 2026E, inclusive of ~$70 million of separation-related costs. Over the FY 2026E–2028E period, cumulative free cash flow generation is expected to approach ~$1 billion, reflecting improving EBITDA margins, disciplined capital expenditures below historical peak levels, and working capital normalization as the semiconductor-related inventory build moderates. Management emphasizes that the business model remains capital intensive relative to software-centric peers, but free cash flow conversion should improve as automation and footprint optimization reduce labor exposure and manufacturing inefficiencies. Capital allocation priorities are clearly sequenced: first, invest in organic growth through automation, footprint optimization, and electrification program support; second, maintain a competitive dividend policy; third, return excess capital via opportunistic share repurchases; and fourth, pursue selective bolt-on acquisitions that strengthen the company’s automotive architecture leadership or expand exposure to adjacent industrial markets (see Exhibit 2).

Pre- & Post-spin Recommendations: Following our initial pre-spin BUY recommendation, largely predicated on the broad contention that despite an admittedly tough macro backdrop the valuation suggested investors were either ascribing little value to SpinCo or that RemainCo was implicitly trading more in-line with its lower growth/margin auto supplier peers, shares of consolidated/pre-spin APTV declined ~1% (outperforming the S&P 500 by 1.3% but underperforming the Russell 2000 by ~1.2%).  Post-spin, the spin-off effectively separates two businesses with fundamentally different operating models, capital intensity, and margin structures. Versigent, for its part, will emerge as a global leader in vehicle electrical architecture and power distribution systems while, by contrast, post-spin Aptiv will operate as a technology-focused advanced mobility supplier centered on software-defined vehicle architecture, advanced driver-assistance systems (ADAS), centralized computing platforms, and high-value electronic components. These product categories are structurally aligned with several long-term industry megatrends, including the transition toward software-defined vehicles, increasing ADAS penetration, and the growing importance of centralized electrical & electronic architectures within next-generation vehicles (see Exhibit 1).

In terms of valuation (see Exhibit 3), Versigent could be compared with Lear Corp (LEA US), Borgwarner Inc (BWA US), and Valeo (FR FP), which trade at a median 2026E EV/EBITDA multiple of ~4x. Applying this 4x EV/EBITDA multiple to the average EBITDA guidance of Versigent of $0.9 billion yields a segment valuation of ~$4.25 billion. Adjusting for post-spin net debt of ~$1.7 billion, pension liabilities of ~$217 million, minority interest of $191 million and investments in affiliates of $143 million, yields a preliminary post-spin equity valuation of ~$2.3 billion or ~$32.50 per share (based on 1:3 share conversion ratio and ~70.9 million shares outstanding at the time of listing.). 

Post-spin Aptiv, could be imperfectly benchmarked against Denso Corp (6902 JT), Continental AG (CON GY), Gentex (GNTX US), Mobileye (MBLY US), Amphenol (APH US) and TE Connectivity (TEL US), which trade at ~9.5x median 2026E EV/EBITDA. Applying a ~9x multiple to the average guidance of RemainCo’s 2026E EBITDA of ~$2.4 billion implies a segment value of ~$22 billion. Accounting for net debt of $6.2 billion, pension liabilities of $75 million, minority interest of $239 million and investments in affiliates of $1.3 billion, the implied equity value is ~$17 billion, or $78.50 per share (based on a share count of 213 million).

All told, based on current opening indications (and the implied upside to our fair values estimates) we initially rate post-spin APTV as a BUY (amid a modest re-rating toward peers) and post-spin VGNT at NEUTRAL (although we will actively monitor the shares for a more attractive entry if dislocations occur amid a potential shareholder rotation over the next week/weeks as well as an uncertain macro backdrop).

Also, please see The Spin-Off Report dated March 13, 2026, for more information.