RE:RE:RE:RE:RE:RE:RE:RE:Legacy Projects Impact on FY24Yes here is what's available :
TD SECURITIES INC. - CANADA EARNINGS UPDATE April 26, 2024 Price: C$17.11 (04/25/2024) Price Target: C$18.00 HOLD (2) ESG SCORE: 72/100
BETTER-THAN-EXPECTED Q1/24 ADJ. EBITDA
THE TD COWEN INSIGHT Overall, we view Aecon's Q1/24 results release as positive. Adj. EBITDA was strong relative to expectations, and no incremental losses were booked on ARE's four large fixed-price legacy projects. Although we view the quarter favourably, we would prefer to observe additional evidence of improved financial performance on ARE's legacy projects before adopting a more constructive stance on the stock. Event: Aecon reported Q1/24 adjusted EBITDA that was solidly above expectations. Outperformance was driven by better-than-expected margins, which more than offset notably lower-than-forecast revenues. Further, Q1/24 was a 'clean' quarter with no operating losses incurred on Aecon's four large fixed-price legacy projects (losses totalled $40.0mm in Q4/23 and $2.8mm in Q1/23). Impact: POSITIVE
Adjusted EBITDA was $32.9mm vs. consensus of $23.3mm and TD at $22.9mm. Adjusted EBITDA margin was 3.9% (+170bps y/y) vs. both consensus/TD at 2.3%. Note, excluding legacy JV project revenue contribution, ARE's Q1/24 adjusted EBITDA margin would have been 4.3%.
Consolidated revenue was $846.6mm (-23.5% y/y) vs. consensus of $995.8mm and TD at $989.5mm.
Backlog totalled $6.3bln (+1.9% q/q and +4.5% y/y). Backlog expected to be executed over the next 12 months ($3.1bln) was +14.3% q/q, but essentially flat y/y.
Outlook: 2024 was described as a "repositioning year" for Aecon. Management expects flattish to slightly positive y/y revenue growth on a like-for-like basis in 2024, and is focusing on enhanced profitability and margin predictability. That said, ARE expects positive revenue growth in 2025, as various major projects begin to ramp-up.
M&A Commentary: Management highlighted that the acquisition pipeline for Aecon Utilities is healthy, and noted that it expects a strong level of activity in 2024 (focus is on small to mid-sized businesses with transaction values in the $50mm to $150mm range).
Estimate Changes: Although we have made various adjustments to our model (forecast revenues have declined, but expected margins have increased), our adjusted EBITDA estimates are not materially changed.