ENT Entrec's outlook meets Stifel Nicolaus' view as higher margin acquisition strategy pays off
10:18 am by Carrie White
Stifel Nicolaus highlights Entrec's outlook, which exceeded the analysts' forecasts, as well as the company's higher margin services and acquisition strategy.
Shares of Entrec Transportation Services () rose over three per cent Wednesday as Stifel Nicolaus analyst Lara King gave the company a $2.50 target price and buy rating as its fourth quarter results met or exceeded expectations.
King also highlighted Entrec’s outlook, which came in just above Stifel’s forecast, as well as the company’s “higher margin” services and acquisition strategy.
“The growth and maintenance of oil sands projects are Entrec's largest drivers for its specialized heavy haul transportation services and, now, its higher margin crane and lifting services,” King said in a morning research note.
“However, its acquisitions over the last year have added exposure to heavy oil activity and natural gas infrastructure development, as well as to the construction, petro-chemical, mining, and power generation industries.”
King added that Entrec's acquisition strategy to date has focused on consolidating “well-run” private companies and expanding its presence throughout western Canada.
The company has seven locations in Alberta, one in North Dakota and through acquisitions has recently expanded into northern BC.
“Post each acquisition, Entrec has moved swiftly to rationalize the assets and realize cross utilization opportunities,” King noted.
In its fourth quarter, the company posted earnings per share (EPS) of four cents, in line with Stifel’s estimate and one penny below the consensus of five cents.
Revenue of $44.0 million was five per cent higher than both Stifel’s expectations of $41.9 million and consensus of $42.1 million.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) margins of 22.3 per cent came in “modestly higher” than Stifel’s forecast of 21.6 per cent, but below implied consensus of 24.9 per cent.
Entrec’s equipment rental costs in the quarter negatively impacted EBITDA by $1.3 million, and given the demand for these rented assets, the company said it exercised its option during the fourth quarter and to-date in 2013 to purchase several items.
“We would characterize these expenses as expected, but less indicative of go-forward profitability,” King wrote.
Despite a slower start to 2013 for its businesses levered to conventional oil and gas markets, the company reiterated its guidance that 2013 revenue could exceed $215 million, slightly ahead of the $214 million Stifel is forecasting.
Entrec specializes in the transportation and rigging of oversized cargo for the oil and gas, mining and power generation sectors.
The company’s shares were up 3.23 per cent as at about 10:15 a.m. EDT, trading at $1.60.
https://www.proactiveinvestors.com/companies/news/41604/entrecs-outlook-meets-stifel-nicolaus-view-as-higher-margin-acquisition-strategy-pays-off-41604.html