Electronics Manufacturing Sector: Mixed Signals Amid Inventory Challenges and Recovery Hopes

Bel Fuse Stock: Inventory Issues Persist (Rating Downgrade) (NASDAQ:BELFB)

Inventory issues persist, leading to a downgrade to a hold rating, with uncertainties in the market causing further volatility. Introduction Bel Fuse Inc (NASDAQ:BELFB) recently reported Q2 earnings, and since I haven't covered them in almost a year, I thought it would be a good time to check on how the company performed since then. Since my first article, on the company, when I gave it a strong buy, BELFB outperformed the S&P500 (SPY) by a decent margin. In that article, I said that the management is very capable and knows the company very well as they managed to improve profitability, while sales started to drop, however, I didn't foresee such a drop in sales. Over the last year, the company saw massive declines due to oversupply in inventory, which led to soft demand from customers, while it managed to maintain its profitability. However, I am downgrading the company to a hold, as inventory issues persist. Briefly on Performance In terms of revenues, we can see it has been a tough period for Bel Fuse. From the start of 2023, every quarter we saw revenues decline. Some of these declines can be attributed to the company divesting its Connectivity business in the Czech Republic but most of these massive declines did come from a very soft demand for the company's products, especially in the Power and Magnetics segments. The company was plagued with high levels of inventory, which further decreased its ability to generate good growth. Looking at the company's margins, despite the doom and gloom of the sales figures, BELFB managed to improve its efficiency and profitability quite a bit over the same period, which is very admirable of the management. The management knows how to run the company and knows where to cut losses and trim the fat to make up for losses in sales. Continuing with efficiency and profitability, we can see that the company's ROA and ROE have taken a slight hit in the recent quarter because its net margins saw a slight dip. Nevertheless, the use of assets and shareholder capital seems to be quite good, and well above my minimums of 5% for ROA and 10% for ROE. The management is very efficient at utilizing the company's assets and investor's capital. Unfortunately, the company doesn't provide specific names of peers. Therefore I have to look at the default companies provided by SA to look at the company's return on total capital, so take the comparison with a grain of salt. The reason I like to look at the company's ROTC is to gauge its competitive advantages and whether it has a moat. If a company's ROTC is over 10%, then it's a good indication that what the company offers is hard to match. The company has a moat and strong pricing power. BELFB's ROTC is around 13%, so it does seem like it has a decent moat in my opinion, and anything over 10% deserves a premium on its share price. By premium, I mean a lower margin of safety. Overall, the company's top-line performance is a lot to be desired, however, it doesn't seem to affect its profitability all that much, so once that big issue is solved, I would expect further efficiencies to come through. Q2 Results As of Q2 '24, the company's revenues came in at $133.2m, which is down -21% y/y. The company beat top-line estimates by $3m. EPS came in at $1.43, which was a massive beat of $0.54. Gross margins came in at 40.1%, an improvement as we saw in the previous section of over 700bps y/y. That is impressive. The company saw "solid results within the commercial air, defense, and rail end markets", unfortunately nowhere near enough to offset the weakness within the networking segment as the customers continue to work through an oversupply of inventory. The company's backlog continued to slide this quarter, with a decrease of $69m, or 18% from December 31st '23, with the Power Solutions and Protection business backlog dropping 30%, and an 11% decline in the Magnetic Solutions business. In terms of the company's financial position, BELFB has around $143m in cash and treasuries, against still $60m in long-term debt. The company doesn't seem to be in a hurry to pay it back, and I don't blame them. The company's interest rate on the debt is around 3% and the company's cash position pays almost 3 times as much as it has to pay out in interest expenses on that debt. So, the company is at no risk of insolvency. Overall, the results are only clouded by the company's struggling top line. In many companies that experience a slowdown in sales or a plummet in sales, their efficiency goes down with it. It is usually because of fixed costs being spread over fewer sales, but here it seems that the team was able to cut down significantly on costs and improve its efficiency, and that is very commendable. Comments on the Outlook It looks to me that the company's biggest issue right now is that it is going through a down cycle. The negativity comes from the oversupply of inventory that the customers still have to work through. When asked about a potential turnaround regarding inventory, the management had this to say: "In our industry, it's always six months. It's six months. And you go back to the guy, it's six months. You know, we're in constant contact with Arrow, Adnet, and all the major distributors. And we keep asking them, when's inventory going to be down? When are you going to see new orders? When are you going to see new orders? And they always come back, six months, six months." So, the company isn't giving a lot of indication of a turnaround in that sense yet, but also said that one day the distributors will start ordering once again, out of thin air, so expect this to change within the next year or so. Due to this, I am expecting further top-line disappointments for a while. Is there any bright side? I think, to an extent, there are some positive developments with the aerospace, but nothing that could help it tremendously until all inventory stabilizes and the company sees new orders. Another positive is I would like to see how the company's products will cater to the AI hype of the last 2 years. The company's power management products were already basically AI-ready according to the management, so are we going to see some catalyst from this part of the segment? Farouq Tuweiq, the CFO of the company seems to think so, citing, "So, we tend to focus on really what is the new inbounds, what are the new opportunities coming in, and we're seeing those come in. And we do expect sequential growth - our AI customers are on play, as we go out through the year and heading into 2025. So, we're optimistic about it, and we're seeing it. We think that it is a real thing, but it will take a while, especially as the channel clears out a little bit, and some of where we're playing in position there takes a toll." So, it is hard to gauge how the next while develops if we are not getting much indication on the inventory problem. However, the next quarter is said to come in at a midpoint of $122m, which is another -23% y/y. Let's have a look at some assumptions. Valuation As usual, I'll keep it conservative. For revenues, analysts (although not many to observe) believe the company will see -20.5% growth for FY24, which makes sense given how the first half of the year developed. After that, the company will see a rebound of around 10%. FY25 is the last year that analysts are covering, so I decided to taper off the company's revenue assumptions to 2% growth by FY33, giving 2% CAGR over the next decade. It is slower than what the company managed to do over the previous decade (3.1%) and much slower than the company's 5 and 3-year CAGRs, 6.8%, and 8.5%, respectively. So I think I am being quite conservative in my assumptions here. For margins and EPS, I went with similar numbers that the analysts are expecting for FY24 and FY25, then after that, the company will see around 4% growth annually, as I decided to keep the margins stable throughout the model. Mind you, gross margins are much lower than what the company managed to achieve in the latest quarter. For the DCF model, I went with the company's WACC of 9.1% as my discount rate, and a 2.5% terminal growth rate because I would like the company to at least keep up with the US long-term inflation goal. Additionally, I decided to add a 15% discount to the final intrinsic value just to give myself more room for error in estimates. With that said, BELFB's intrinsic value is $77 a share, meaning it is currently trading below its fair value. Risks The inventory issues may persist for much longer, and given the company's guidance for Q3, it seems that margins may come down slightly too. This will bring a lot more volatility going forward, especially if the downcycle continues into 2025, which it looks like it may. The overall markets are in such a volatile time right now, that small companies like BELFB will experience massive swings. The Nasdaq Composite (QQQ) has been moving 4% one day (up 1% only to reverse and be down almost 3% for the day) as of writing this update (August 1st after the close of markets), so expect further volatility, as there seems to be rotation happening and a slate of misses from the big companies dictate where the markets are going. Intel Corp (INTC) and Amazon (AMZN) reported numbers on this day, and it seems that the Nasdaq futures are already down right now. AI hype may not translate to a decent catalyst and the company will continue to see declines in the top line. Closing Comments I believe the downturn may continue for a lot longer, which means I am going to assign it a hold rating. I would like to hear a few more quarters about the situation regarding inventory levels and a pick-up in demand before I feel comfortable giving it a buy rating once again. The overall market jitters in general are a big deterrent right now too. The fears are escalating, and I think we will see further downside in the short run. Once the demand issues start to turn around, I think it will be a good time to start a position because even with my conservative estimates, the company seems to be trading at a discount, but in the short run, it may get even cheaper. When and if that happens, I have dry powder ready to take advantage. MSc in Finance. Long-term horizon investor mostly with 5-10 year horizon. I like to keep investing simple. I believe a portfolio should consist of a mix of growth, value, and dividend-paying stocks but usually end up looking for value more than anything. I also sell options from time to time. Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Celestica Stock: Q2 2024, Why Do I Upgrade The Stock To 'Buy' Again (NYSE:CLS)

Looking for a helping hand in the market? Members of Beyond the Wall Investing get exclusive ideas and guidance to navigate any climate. Learn More " In August 2023, I initiated coverage of Celestica Inc. (NYSE:CLS) stock and then confirmed the "Buy" rating again in November. Since then, the stock has continued to rise, and at some point, its rally made me cautious against the backdrop of valuation ratios that were moving away from historical averages, and I eventually downgraded CLS to "Hold", confirming that rating 3 months ago. Since my last neutral thesis update, the stock's price has decreased by almost 1.7%, while the market - the S&P 500 index (SP500) (SPY) - has risen by 3%. At that time, my calculations regarding the company's fair valuation led me to conclude that there was not enough upside to raise CLS's rating to "Buy" again. However, in light of recent events, such as the company's Q2 FY2024 report (and other corporate developments), which was released just a week ago, I believe that Celestica stock now deserves a "Buy" rating, as I think its upside potential has increased. As I often do, let me first begin by describing Celestica's business structure, with 2 main segments: Connectivity and Cloud Solutions (CCS) and Advanced Technology Solutions (ATS). The CCS segment, which accounts for 55% of Q2 2024 revenue, includes enterprise, communications, telecommunications, server and storage services. The ATS segment, on the other hand, which accounts for 45% of revenue, comprises aerospace and defense (A&D), industrial activities such as energy storage and electric vehicle charging, healthcare technology, and capital goods. In the 2nd quarter of FY2024, Celestica showed good consolidated performance with total sales amounting to $2.39 billion, a +23% YoY increase from $1.94 billion reported in Q2 2023. After adjusting for IFRS effects, the EBIT margin increased from 5.5% to 6.3% year over year - that's an improvement of 80 basis points, which looks like a lot to me. As a result, adjusted EPS increased significantly to $0.91 (compared to $0.55 in the second quarter of 2023), i.e. earnings per share increased by 65.45%, which means that operating leverage keeps doing what it should and the company still hasn't fully reached its peak margins. The consensus expectation regarding both sales and earnings was beaten with a comfortable margin: One of the reasons why I initially lowered my rating six months ago was due to concerns that the company might have reached the peak of its margins. This could reduce the positive impact of operating leverage, and as a result, the forecasted growth rates might not be justified in the future. I'm not sure to what extent this company will be able to continue to have strong financials and benefit from the AI tailwind any more than their peers, but I suspect that the business diversification efforts and still low base should allow the company to grow in the long term. But as for the potential for margin growth in the medium term, I've doubts that CLS will continue its rapid growth. However, as we see from the results of the last two quarters, my concerns were unfounded - Celestica continues to actively grow and increase its operating capacity and leverage, while its margins are still expanding, and the top-line growth prospects, in my opinion, are definitely not diminishing. Let's take a look at the Q2 performance of individual business segments: The CCS segment stood out with a sales increase of +51% YoY ($1.62 billion). As the management explained during the earnings call, this growth was "driven by strong demand in both the enterprise and communications end-markets, particularly from hyperscale customers' investments in data center infrastructure." Also, the CCS segment's EBIT margin improved by 120 basis points for just one year (from 6.0% to 7.2%). So CCS's strength offset the whole negative impact from the ATS segment, which recorded an 11% decline in revenue to $768 million, mainly due to "the continued weakness in the industrial business." Some of ATS's end markets, like the Aerospace & Defense and Capital Goods ones recorded double-digit growth increases, but in contrast to CCS, the ATS segment's EBIT margin decreased slightly from 4.8% in the second quarter of Q2 2023 to 4.6%. In fact, this can even be considered a victory for CLS, as the decline was only 20 basis points, so considering that ATS's end markets' segments depend more on classic cyclical industries, I believe that as economic activity in the U.S. and North America as a whole stabilizes, this segment's margins should also normalize. As mentioned in previous articles, I believe the main driver of growth will come from the CCS segment, which is directly connected with artificial intelligence and the transition to next-generation computing programs next year. The management itself speaks about it during the latest earnings call, giving us a target top-line growth rate for 2024. We anticipate incremental growth in networking, driven by healthy demand for our market-leading 400G switch products, and ramping programs in the 800G switch, as well as growth in storage. We expect that this strength will more than offset a slight reduction in AI/ML compute, driven by technology transitions in certain sole-sourced programs. We expect to ramp up new AI/ML next-generation compute programs in 2025. Overall, the demand backdrop for our CCS segment continues to be highly favorable. And as a result, we now expect revenues to be up in the mid-30%s range in 2024. In Q1 we saw approximately 20% revenue growth, and for Q2 we look at about 23% revenue growth; amid that the management projects ending FY2024 with top-line rising by mid-30%s YoY. This indicates a planned acceleration of business expansion in the second half of the year. As far as I can see, the market seems to be not prepared for this, as it's currently predicting only about 19% YoY revenue growth for FY2024: From this, it becomes completely obvious to me where such strong positive earnings surprises come from every quarter: The market systematically underestimates Celestica's ability to grow, so it just keeps beating consensus and sending its stock higher and higher. At the same time, speaking about Celestica's balance sheet, I think it remains healthy with $434 million in cash and equivalents at the end of Q2 (Seeking Alpha Premium data), with total liquidity standing at $1.2 billion (almost 20% of the firm's market cap). Non-IFRS FCF stays stable at $63 million in Q2 (vs. $69 million last year), while the overall trend speaks for itself. I think the $1.8 billion inventory level should support the company's continued growth. Also, it's important to mention here that the overall inventory management system at CLS is working much better now, not only compared to 2023 when the company was still suffering from supply chain issues but also compared to the already good Q1 numbers: As for the debt load, the company's debt-to-equity ratio continues to fall and is well below 1, according to YCharts data. In my opinion, Celestica is spending its free cash flow quite skillfully, balancing between deleveraging and share buybacks, which continue to be quite active to this day. Apparently, the competitive advantages I described back in November 2023 and May 2024 still play a huge role in CLS's development. Unlike many fast-growing companies that prioritize rapid expansion over profitability and shareholder returns, Celestica has struck a balance between these priorities. At the same time, Celestica's strategic diversification into higher-margin segments has significantly improved financials, boosting margins and EPS, and setting it apart from its peers. With the company's competitive advantage in mind, let's try to evaluate how fairly the stock is traded today. My mistake in the past, when I last did a DCF model, was that I focused on the consensus estimates. Now we see that management expects fairly rapid revenue growth amid no reaction from Wall Street (which is why CLS keeps beating). So I'll take the management's expectations into account, with a small correction downward to comply with the principle of conservatism. I assume in FY2024, the company's revenue will grow by 25% YoY, and for the next 2 years, it will grow by 20%, then gradually decrease to 10% by FY2028. At the same time, the operating margin will continue to grow, reaching 7% by FY2025 and gradually increasing to 9% by FY2028. For other operational metrics, I'll assume average historical indicators. I also take into account that the ratio of CapEx to revenue will likely remain at ~1.5%. The current value of the risk-free rate as I write these lines is ~4.12%. Assuming a cost of debt of 10%, MRP at 5%, and an effective tax rate of 20%, I arrive at a WACC of 9%: Right now, the stock is trading at a 19.6x multiple of enterprise value to free cash flow, but we can say that the "fair" long-term average is approximately around 12-13x. But even if we assume that by the end of 2028, the stock will be trading at only a 10x EV/FCF multiple, we'll still get a huge potential upside - around 68.7% from today's stock price. Thus, in my opinion, I feel like I'm obliged to upgrade my rating based on the calculated undervaluation today. Please beware that investing in CLS stock comes with several potential risks. First off, there is industry risk, as the electronics manufacturing services sector is cyclical and sensitive to fluctuations in demand for electronic products. Customer concentration risk is another concern, as a significant portion of Celestica's revenue is derived from a limited number of clients, making it vulnerable to reductions in business from key customers. In addition, foreign currency risk arises from operating in various foreign markets, which exposes the company to exchange rate fluctuations that can have a negative impact on earnings. In order to remain competitive in the rapidly evolving EMS industry, continuous technological investment is also required and if the company doesn't keep pace with advances, it may lead to a loss of market share. Furthermore, CLS's stock price action shows that such a strongly one-sided upward movement may not always be sustainable. If we look at the daily chart, we'll see the structure of an emerging "lower low", which could potentially indicate a change in medium-term trend: Despite the aforementioned risks, I still believe that growth in the end markets for both segments of the company is not yet fully realized. Celestica, thanks to its effective business model and ability to continue increasing margins and maintaining its current operating leverage, keeps growing. My concerns from six months ago regarding further margin expansion prospects have been alleviated by CLS's largest segment in terms of operating profit and revenue - CCS. I believe this very segment will continue to have opportunities for further expansion thanks to AI trends, and management will continue to make efforts to strengthen margins there (and also at ATS as the economic cycle turns). This should, in theory, lead to higher growth rates than the market currently expects. By the way, a few words about technical analysis: if we look at the weekly chart, we see that the current correction is most likely temporary. The CLS stock price is consolidating around the 25-week moving average, and based on the long-term trend, I think we may see a recovery in the next few weeks. In any case, the undervaluation of the company could exceed even the value I indicated above. According to my DCF model - based on realistic input data, in my view - Celestica stock is undervalued by approximately 68.7%. That's why I'm upgrading it to "Buy" today.

Advanced Energy Industries Q2: Slow Progress; Worst Is Likely Over

AEIS shares are a borderline call based upon current results, but rebounding revenue and margin expansion in FY'25-FY'27 can support a bullish thesis if execution comes through. When I last wrote about Advanced Energy Industries (NASDAQ:AEIS), I said that I expected Q1'24 to be the low point of the cycle for this supplier of power conversion and control systems, and that still appears to be the case. That said, key segments like Industrial are still seeing destocking and the rebound in semiconductor demand likely won't really hit until 2025. That leaves AEIS in something of a gray area as the business crawls along in the near term, but still offers attractive to leverage to increasingly elaborate semiconductor production demands, industrial electrification, and data center capex. AEIS shares have risen about 10% since my last update, even with a post-earnings selloff. Benchmarking that performance is a little challenging as the company doesn't have a lot of "apples to apples" comps, but Delta Electronics (OTCPK:DLEGF) (2308.TW) has outperformed, while Comet (COTN.SW), MKS Instruments (MKSI), and XP Power (OTCPK:XPPLF) (XPP.L) have underperformed over that same period. At this point, AEIS is still a somewhat challenging recommendation. I like the leverage the company offers to more elaborate deposition and etch steps in semiconductor manufacturing (through major customers like Applied Materials (AMAT) and Lam Research (LRCX)), and I like the longer-term opportunities in industrial electrification, medical devices, and data centers, but the company has a lot more to prove in those latter markets. I still lean "buy" here, but that is very much predicated on a meaningful ramp in revenue and margins over the next 12 months. AEIS did report better than expected results for the second quarter, but the results were in-line to down relative to expectations at the start of the year - in other words, the company beat a bar they lowered after Q1 earnings, but overall performance is still trending weaker than what analysts and management expected at the start of the year after Q4'23 earnings. Revenue declined 12% year over year but did return to sequential growth (up 11%) this quarter, beating expectations by <1% to around 4% depending upon which estimate reporting service you use. Revenue from the Semiconductor segment was up 9% yoy and 5% qoq, beating expectations by about 3% and this is the one business that is tracking pretty close to initial expectations for the year, even though demand outside litho equipment really hasn't hit its rebound stride yet. In the Industrial business, AEIS continues to see painful destocking (and weaker end-user demand, I believe), with revenue down 38% yoy and 5% qoq, missing by around 5%. Data Center rebounded nicely, up 24% yoy and 74% qoq and beating by more than 10%, but there was a notable push out from Q1. Lastly, the Telecom/Networking business remains rough, down 56% yoy but up 10% and slightly better than expected, but accounting for less than 7% of revenue. Gross margin declined 30bp yoy and improved 20bp qoq to 35.3% (non-GAAP), beating by about 30bp and helped by the stronger Semi and Data Center results. Operating income declined 31% yoy and rebounded 57% qoq, beating by 23%, with margin down 260bp yoy to 9.3% and up 270bp qoq, beating by 150bp. Management's guidance for Q3'24 did not provide the sort of strong affirmation that the worst is over, and the rebound has begun that the Street wanted (and arguably needed) to hear. The revenue guide calls for only a modest sequential improvement in revenue (about 1%) and was modestly below Street expectations, as a return to sequential growth in Industrial could still be a quarter away (and a more meaningful upturn could be more of a mid-2025 event). Management's EPS guidance was also less than reassuring. While the midpoint of $0.90 was indeed a bit above the Street's prior estimate ($0.88), the spread of +/- $0.25 would seem to reflect a lot of uncertainty about volumes, product mix, and the near-term benefits of manufacturing efficiency efforts (including factory consolidation). To be fair to management, there's little to be gained from creating an artificial sense of precision, but it does underline the still-shaky and uncertain nature of the recovery at this point in time. Still the largest business for AEIS, I have the least concerns about the pending recovery in the Semiconductor business. While semiconductor inventories do still remain too high, this isn't a permanent situation and I do expect capacity growth to pick up next year, driving demand for more (and more sophisticated) deposition and etch equipment. As semiconductor production gets ever more sophisticated and demanding, the need for more precise power control grows. With newer products like eVerest and eVoS coming on and opportunities to gain share in areas like dielectric etch, I believe multiple years of double-digit growth in this business starting in 2025 is a reasonable expectation. With Industrial, the issue isn't the size of the opportunity, but management's ability to execute. I like the long-term opportunity to benefit from drivers like industrial electrification (particularly through test & measurement and motion control/robotics) and the growth of ablation in the medical device space, but AEIS has long struggled to execute outside of its core semiconductor markets and the company still needs to prove that it can develop the products needed to grab and hold share in the more attractive segments of the market. So too with Data Center. Underlying demand growth isn't the issue - data center capex remains robust and data center power demands continue to scale higher (particularly for data centers devoted to AI). The issue, as with Industrial, is showing that it can compete effectively against entrenched suppliers like Delta and win share for high-value/high-margin solutions. Considering that context, it's worth mentioning the company's attempt to acquire XP Power earlier this year. Although AEIS offered a rich premium, XP Power had no interest in even discussing the bid, and AEIS moved on. I'm not entirely sure what to make of the company's approach, though. On one hand, XP Power's split between semiconductor (around one-third of revenue), industrial (over 40%), and medical (over 25%) has obvious synergy, and the gross margins here have been decent (low-40%'s). On the other hand, at some point, AEIS has to show that it can compete effectively through internal product development and take away market share from established rivals. The extent to which this was an opportunistic bid versus an acknowledgement that the portfolio isn't where it needs to be is the major uncertainty for me, though I lean more toward believing this was a chance to add a useful portfolio of assets at an appealing price as opposed to an acknowledgement that the AEIS Industrial business isn't competitive enough on its own. I've pulled back my expectations for FY'24 and FY'25 a bit, mostly on a weaker outlook for the Industrial and Telecom/Networking segments. I still have some concerns about real end-user demand in multiple industrial markets and as reports from companies like Ericsson (ERIC) confirm, conditions in telecom capex are still really weak. I'm still looking for a significant rebound in FY'25 (revenue up 17%), with double-digit follow-through in FY'26 and FY'27 (the latter may be a bit ambitious). Long term, I'm still looking for annualized revenue growth of between 5% and 6%, less than half of the trailing growth rate. I expect this year to be the bottom for margins as well, with gross margin improving about four points over the next two years and operating margin improving more than six points on better leverage. At the free cash flow line, I expect improvement back into the mid-teens over the next three to four years and low double-digit long-term growth. As far as valuation goes, I expect high single-digit long-term annualized appreciation based on discounted cash flow. Multiples-based approaches are more challenging, as weaker near-term performance drags down the apparent fair value. I think a fair value in the $110-$120 range is reasonable based on margins over the next 12 months, but if and when the rebound shows in the numbers and the Street gains more confidence around a margin recovery in FY'25-FY'27, a fair value in the $130's becomes more plausible. Being bullish on AEIS today requires confidence that the semiconductor equipment market will strengthen in 2025 (and beyond), data center capex will remain strong, and industrial demand will rebound in 2025, as well as confidence in management execution. I'm confident about the market outlooks, but management's ability to drive improvements in market share, mix, and margin are still more in the "potential" column for me. I do still see enough upside to remain bullish, but I want to emphasize again that this is an execution-driven story, even with underlying market rebounds creating tailwinds over the next 12 months.