Freedom Broker upgraded its rating on Taylor Devices shares to “Buy”

Freedom Broker improved its medium-term outlook for engineering components manufacturer Taylor Devices (TAYD), a producer of shock absorbers and energy absorption systems used to protect buildings, bridges, industrial and military equipment from impact loads. Analysts raised the company’s target price from $67 to $70 and upgraded the rating from “Hold” to “Buy”. The new target price implies upside of about 21% relative to the $57.70 price at the time of the report’s preparation.

Record order backlog improved Taylor Devices’ outlook

Taylor Devices’ fourth-quarter revenue came in at about $9 million—around 30% below Freedom Broker’s forecast of $12.8 million. Analysts attribute the gap to later order placements by customers: a significant portion of new contracts did not have time to move into production and be reflected in results before the end of the fiscal year. For fiscal 2026 as a whole, revenue fell 10% to $41.6 million.

At the same time, the situation with future orders improved markedly. While the confirmed order backlog totaled $20.8 million at the end of the previous quarter, by fiscal year-end it had reached a record $52.8 million. About 92% of this amount is attributable to aerospace and defense customers. In Freedom Broker analysts’ view, this suggests that weak revenue dynamics in recent quarters were largely due to delays in contract placement and ramp-up, rather than deteriorating demand.

Defense business could become the main growth driver

The aerospace and defense segment remains the backbone of Taylor Devices’ business. The company participates in supply chains for a number of key missile and naval programs. Plans to ramp up production of Patriot, THAAD, and SM-3 systems create prerequisites for further growth in demand for its components. Capacity expansions by the largest defense contractors may also gradually increase utilization among second-tier suppliers.

An additional argument in favor of the improved forecast was the historical conversion of orders into sales. Over the past ten years, the median ratio of Taylor Devices’ defense order backlog to annual revenue was about 132%. This means the company has historically received and fulfilled additional orders directly during the fiscal year. At the same time, due to the long execution cycle for large defense contracts, quarterly results may remain uneven.

Construction market remains a risk factor

The structural segment remains Taylor Devices’ weaker area. Its fourth-quarter revenue fell 59% year over year to $2.3 million, and full-year sales declined 31%. The segment’s share of the order backlog dropped from 19% to 5%. Pressure is linked to high financing costs and weak construction activity. Analysts also do not rule out intensifying competition from cheaper alternative technologies.

Freedom Broker expects Taylor Devices’ financial performance to grow

Freedom Broker forecasts a notable recovery in Taylor Devices’ results in the new fiscal year. In fiscal 2027, revenue could rise to $58.6 million versus $41.6 million a year earlier, while adjusted EBITDA could increase to $15.3 million from $10.9 million. By 2029, analysts expect revenue to grow to $73 million and adjusted EBITDA to $19.4 million.

Against this backdrop, analysts raised the target price for Taylor Devices (TAYD) shares from $67 to $70 and upgraded the rating from “Hold” to “Buy”. Freedom Broker considers the defense segment the company’s main source of growth in the coming years, while weakness in the construction market remains one of the key constraining factors.

Defense sector supported by major government orders

Taylor Devices’ strong backlog is being formed against the backdrop of resilient demand in the U.S. defense sector. Previously, Freedom Broker wrote about new agreements between the Pentagon and Lockheed Martin (LMT) totaling around $3 billion. The contracts cover, among other things, the F-35 and CH-53K programs, as well as satellite production for the U.S. Space Force.

In August, Freedom Broker also noted Lockheed Martin’s strong results: in the second quarter, the defense corporation’s revenue rose 11% year over year to $20.1 billion, and the company improved its full-year guidance. Analysts linked the business’s further prospects, among other things, to execution of the accumulated order backlog.

This is not an individual investment recommendation.