National Bank National Bank's Mr. Evershed lowered his organic growth assumptions for the remainder of Park Lawn Corp.’s fiscal year to align with guidance for a “roughly flat performance,” despite a stronger-than-anticipated top line in the first quarter.
He thinks the Toronto-based funeral home operator has seen difficult COVID-19-driven comps “quietly pass” and emphasized an outlook for a year-over-year decrease in mortality.
“PLC is now beginning to lap relatively easier comps in Q2 and onwards as COVID-19 entered a mostly steady endemic state a year ago,” he said. “Volume headwinds in the quarters ahead should thus be more muted, aligning with guidance for roughly flat performance.”
“Subsequent to quarter end, PLC acquired Speaks in Missouri, joining the mid-March addition of Meyer in Iowa and Nebraska. The two acquisitions represent eight new standalone funeral homes and one cemetery generating roughly $4-million in Adj. EBITDA. Management noted a robust pipeline, and with $127-million in available credit and access to capital if necessary, we believe PLC is in a prime position to accelerate out of the industry’s post-pandemic haze.”
Pointing to higher borrowing costs and a rise in net debt, Mr. Evershed trimmed his target for Park Lawn shares to $32 from $32.50 with an “outperform” recommendation. The average is $34.83.
“We rate PLC Outperform, as with the toughest comps in the rearview mirror and a plethora of levers available to management to push margins higher, we believe operations should trend positively from here,” he said.