Conduent shares get a boost with raised stock price target to $5.65

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Conduent shares get a boost with raised stock price target to $5.65
Credit: © Reuters.

On Tuesday, Singular Research analyst Michael Mathison raised the stock price target on Conduent (NASDAQ: CNDT ) to $5.65 while maintaining a Buy rating.

The firm's optimistic outlook follows Conduent's announcement of significant divestitures, including the sale of its Curbside Management and Public Safety Solutions businesses, which is expected to bring in $260 million in proceeds. This sale also involves the transfer of $30 million in lease liabilities.

Conduent has been actively restructuring its portfolio, with the recent divestiture of its Benefit Wallet business. These strategic moves are part of a larger plan to close more than $600 million in divestitures in the fiscal year 2024.

Conduent's strategy includes the redeployment of $1 billion in capital over the next two years, which encompasses proceeds from asset sales and cash flow improvements. This capital redeployment is significant as it represents more than 100% of the company's current market capitalization.

The company has reported its fourth-quarter revenue for 2023 at $953 million, which is a 2% increase over Singular Research's estimates but shows a 3% year-over-year decline. The drop in revenue for both the quarter and the full year is attributed to the runoff of previously lost business.

Despite the revenue challenges, Conduent's adjusted EBITDA for the quarter was $103 million, surpassing estimates by 16%, with an EBITDA margin of 10.8%, which is 100 basis points higher than expected. The adjusted EPS for the quarter came in at $0.03, slightly below the estimate by $0.01.

Mathison's comments reflect a positive outlook on Conduent's future, noting that while revenue decline due to lost business has affected the stock, the company's revenue is stabilizing, and the ongoing asset sales are promising signs. The analyst's bullish stance on Conduent is supported by the increased price target, which suggests confidence in the company's strategic initiatives and future performance.

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