Guidance maintained, but likely goes higher. Mgmt indicated on the call that they are deferring any update to guidance until next quarter; but admitted based on the trends in March that bias is certainly to the upside. Recall that the current guide is for EBITDA of $260MM, and consensus was not far off going into the quarter at $261MM. Based on the conf call commentary, we see it as likely that consensus does go higher (note we are already at $266MM (unchanged)).
Management reviewing a number of M&A opportunities. Management highlighted during the call that they expect to be active in M&A, in line with commentary from the release in which they noted that they continue to pursue acquisitions that improve lane density, or expand network coverage, and that they are actively reviewing a number of files. We would view a pick-up in activity as a meaningful catalyst for the shares and note that we build M&A activity into our valuation methodology. Moreover, we view the balance sheet as well positioned for potential deals at 2.5x leverage (versus debt covenants for 3.5x), which implies ~$250MM of dry powder.
Estimates unchanged. As noted above, our 2022E EBITDA is already above guidance and consensus - both of which we see moving higher. Accordingly, we are leaving our 2022 and 2023 estimates unchanged at $266MM and $274MM, respectively.
Price target to $15 (from $14); maintain Outperform. We remain positive on MTL shares post Q1 results reflecting a >10% FCF yield on our 2023 estimate as well as due to potential upside on the back of M&A, increased pricing and a pick-up in capital spending in Western Canada. Our target price increases to $15 (from $14) reflecting our unchanged 2023 estimate applied to our target multiple of 7.5x (from 7x), which we brought higher to reflect a more positive outlook on the capital economy in Western Canada. We reiterate our positive view on the shares and maintain our Outperform rating.