Franklin Electric upgraded at D.A. Davidson on AI data center, rare-earths growth

D.A. Davidson upgraded Franklin Electric FELE to Buy from Neutral and raised its price target to $135 from $105, citing growth opportunities in artificial intelligence data centers and critical minerals mining. The new target implies approximately 42% upside from the stock's October 30 closing price of $95.38.

In a November 2 research report, analyst Matt J. Summerville said investors may be underestimating the company's potential to expand beyond its traditional residential water systems and agricultural markets into faster-growing industrial applications.

The upgrade reflects Franklin Electric's expanding role in supplying pumps, motors and electronic drives for liquid-cooled data centers. These systems help manage heat generated by AI computing equipment, creating opportunities for suppliers of specialized cooling infrastructure.

D.A. Davidson estimates that data center-related products will generate $40 million to $50 million in revenue this year, with sales potentially increasing severalfold through the end of the decade. The firm expects growth to accelerate in 2027 and 2028 as manufacturers expand liquid-cooling capacity.

Franklin Electric FELE is also expanding its mining equipment business through the pending acquisition of Challenge Pumps. The transaction is expected to roughly double its critical minerals business, bringing annualized revenue to at least $100 million. The company's minerals business recorded 70% year-over-year growth in the third quarter.

For investors, the expansion into AI infrastructure and critical minerals could diversify Franklin Electric's revenue and support higher profit margins. The company also stands to benefit from efforts to develop mineral supply chains outside China, according to the report.

Summerville raised his 2026 earnings estimate to $4.75 per share from $4.65 and his 2027 forecast to $5.45 from $5.05. He initiated a 2028 estimate of $6.20 per share.

The analyst also highlighted Franklin Electric's distribution improvements, including an on-site inventory program expected to generate approximately $100 million in sales this year. The company operates about 750 inventory locations serving water-well contractors.

D.A. Davidson expects acquisitions, operational efficiencies and strong cash generation to support further earnings growth. Its $135 target assumes a valuation of 15 times projected 2027 adjusted earnings before interest, taxes, depreciation and amortization.