Baird has revised its price target for UL Solutions (ULS, Financial), lifting it to $73 from the previous $60. Despite this increase, the firm maintains a Neutral rating on the stock. This update comes in the wake of the company's impressive first-quarter performance, where better-than-expected margins were reported, indicating a robust beginning to the fiscal year.
ULS Key Business Developments
Release Date: May 06, 2025
- Consolidated Revenue: $705 million, up 5.2% year-over-year; 7.6% organic growth.
- Industrial Segment Revenue: $308 million, 8.1% organic growth.
- Consumer Segment Revenue: $304 million, 7.7% organic growth.
- Software and Advisory Segment Revenue: $93 million, 5.6% organic growth.
- Adjusted EBITDA: $161 million, up 22.9% year-over-year.
- Adjusted EBITDA Margin: 22.8%, up 320 basis points year-over-year.
- Adjusted Net Income: $80 million, up 31.1% from $61 million in Q1 2024.
- Adjusted Diluted EPS: $0.37, up from $0.28 in Q1 2024.
- Free Cash Flow: $103 million, up from $84 million in Q1 2024.
- Cash and Cash Equivalents: $267 million as of March 31, 2025.
- Capital Expenditures: $51 million, down from $57 million in Q1 2024.
- SG&A Expenses: Decreased to 32.9% of revenue from 34% in Q1 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- UL Solutions Inc (ULS, Financial) reported a 5.2% increase in consolidated revenues for Q1 2025, with organic growth of 7.6%.
- The Industrial segment led with an 8.1% organic growth, followed by Consumer at 7.7% and Software and Advisory at 5.6%.
- Adjusted EBITDA grew by 22.9% year-over-year, with a margin expansion of 320 basis points.
- The company generated over $100 million in free cash flow, maintaining a strong balance sheet.
- UL Solutions Inc (ULS) announced strategic expansions in HVAC testing facilities and a new global fire science center, aligning with mega trends in key markets.
Negative Points
- The company faces FX headwinds and impacts from acquisition divestitures, which partially offset revenue growth.
- There is an increasingly uncertain macroeconomic and geopolitical environment, presenting potential risks.
- The Consumer segment may experience moderation in organic revenue growth in Q2 due to tariff-related activities.
- The Advisory segment is described as lumpy, with potential headwinds from shifts in sustainability regulations and the commercial real estate market.
- The effective tax rate is expected to increase to approximately 26% in 2025, up from 16.9% in 2024, due to changes in international tax regulations.
