Atmus Filtration Technologies Inc. ( ATMU ) has strong growth potential, driven by its ability to expand in core and adjacent markets, according to JPMorgan analyst Tami Zakaria.

On Thursday, Zakaria raised the stock’s price forecast from $44 to $46, and maintained an Overweight rating.

Zakaria writes that with steady cash flows and a strong balance sheet, the company is well-positioned to enter the broader industrial filtration market through strategic acquisitions.

Despite earning over 80% of its revenue from the aftermarket, Atmus Filtration’s valuation is currently discounted compared to its peers. The analyst notes that the company’s planned move into industrial filtration is expected to narrow this valuation gap over time. This will bring it in line with direct filtration competitors.

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In the near term, management is confident in its ability to offset any potential cost increases from tariffs by adjusting prices in the aftermarket if current exemptions are removed after April 2.

Atmus Filtration ( ATMU ) intends to counter any tariff-related cost hikes through flexible pricing adjustments, notifying customers of potential price changes if broad tariffs without current exemptions.

While the possible cancellation of the 2027 NOx regulation is unlikely to have a significant effect on this year's industry outlook, it could lead to a more balanced production schedule over the next few years, the analyst adds.

Per Zakaria, Atmus Filtration ( ATMU ) expects the NOx regulation to still go into effect, though the extended warranty requirement might be eliminated.

Looking ahead, management is focused on driving organic revenue growth at a rate of approximately 4%, which is expected to generate a 25% incremental margin. Further growth potential comes from significant wins with major OEMs and acquisitions in the industrial filtration market.

Based on this, Zakaria adjusted estimates upward due to the latest foreign exchange rates.

Price Action: ATMU shares are trading lower by 0.33% to $37.88 at last check Thursday.

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