Atlas Corp. (ATCO) shares extended their rally more than 5% during Tuesday's session after BMO Capital upgraded the stock to Outperform with a $9.00 price target. Analyst Fadi Chamoun called Atlas an "undiscovered stock in an underflowed industry" that offers a 7.9% dividend yield and significant capital appreciation potential. While it has cyclical end markets, the company's revenue is largely contracted with counterparties that have strong credit ratings.
The move came after the stock's rally following its mixed first quarter financial results. Revenue rose 8.1% to $308.4 million, beating consensus estimates by $4.59 million, but net income came in at 15 cents per share, missing consensus estimates by 10 cents per share.
Atlas generates most of its EBITDA from ocean container shipping (87%), which makes it susceptible to the global economic slowdown from COVID-19. However, it maintains an attractive dividend yield that it recently left in place, and power generation accounts for the remainder of EBITDA.
From a technical standpoint, Atlas stock extended its rally to break out from the 50-day moving average at $7.07 during Tuesday's session. The relative strength index (RSI) remains at neutral levels with a reading of 52.26, while the moving average convergence divergence (MACD) continues to trend sideways. These indicators provide few hints into future price direction but suggest room for a move higher or lower.
Traders should watch for a close above the 50-day moving average and a move toward reaction highs of $7.83 or $8.74 over the coming sessions. If the stock breaks down, traders could see shares hit trendline support at around $6.50 and support near reaction lows of around $6.00. The overall bias appears to be bullish, however, given the favorable financial results and analyst commentary over the past few sessions.
The author holds no position in the stocks mentioned except through passively managed index funds.