National BankHave recently lowered their targets for a great many companies within their coverage. GLTA
National Bank Financial analyst Zachary Evershed believes Neighbourly Pharmacy Inc.’s reliance on relief pharmacists likely weighed heavier than originally anticipated during its first quarter of fiscal 2024 based on a reversal in the improvement of open job postings, leading him to lower his margin estimate. “Our channel checks reveal that Neighbourly’s open positions count reversed course early in June, giving up prior improvements in vacancies,” he said in a research note. “Even though the gross number of job openings does include postings that are most likely irrelevant to margin recovery (e.g., delivery drivers, clerks), we believe it is nevertheless directionally indicative of reliance on relief pharmacists at levels higher than we anticipated. As such, we are now forecasting $19.2 million in EBITDA on 10.0-per-cent margins (was 10.3 per cent) in the quarter, reflecting an adjustment lower to account for increased expenses owing to staffing challenges, though still up 20 bps year-over-year.
“Looking farther ahead, we still anticipate some margin recovery this year as incoming graduating pharmacists enter the workforce this summer, with a more categorical improvement next year, recouping the majority of the 80 basis points labour headwind. However, we highlight the risk that pharmacists currently working for NBLY may seek larger cost of living adjustments as they take note that newer employees are being paid top dollar to ensure the company is able to attract its fair share of graduating students. We do not believe this outcome is reflected in our current estimates, and may represent further downside to our profitability forecasts.”
Ahead of the scheduled Aug. 1 release of its quarterly results, Mr. Evershed is projecting revenue of $192.3-million, up 68.1 per cent year-over-year but below the consensus forecast of $192.3-million. He estimates adjusted EBITDA will rise 70.9 per cent to $19.2-million, also under the Street’s expectation of $19.8-million. However, his adjusted earnings per share estimate of 6 cents, matching other analysts, is a drop of 34.2 per cent from the same period a year ago.
Reiterating a “sector perform” rating for the Toronto-based company’s shares, he trimmed his target to $20 from $20.50. The average on the Street is $26.72.
“As we remain wary that the tight market for new hires may yield higher labour costs in the rest of the network in the coming year, and given the balance sheet remains a limiter on the pace of M&A growth in the current interest rate environment, we maintain a cautious stance,” said Mr. Evershed.