TD webroker: Updated ratings and commentary Several analysts reduced their targets for shares of Enghouse Systems Ltd. (ENGH-T) following weaker-than-anticipated second-quarter results that sent its shares down 4.1 per cent on Friday.
The Markham, Ont.-based enterprise software provider reported revenue of $117-million, down 16.7 per cent year-over-year and 6.4 per cent below the consensus expectation ($125-million). Adjusted earnings per share of 37 cents fell 24.2 per cent and also missed the Street’s forecast by 8 cents.
“This quarter was a tough year-over-year comparison for Enghouse, given record Vidyo fuelled revenue in the year-ago quarter,” said CIBC World Markets’ Stephanie Price. “That said, our fundamental outlook for Enghouse is unchanged. Enghouse has a diversified offering with strong margins and impressive returns from its acquisition strategy (including a one-year payback on Vidyo.”
Ms. Price noted the pandemic continues to hurt Enghouse’s Transportation business, given the drop on public transit ridership.
“We believe that there may be some incremental demand for contactless payment solutions going forward, but that demand will continue to lag until ridership levels return. The recent $29-million contract with Norway to update its National Fire Services Technology should help to offset weakness in the AMG division,” she said.
Keeping an “outperformer” rating for Enghouse shares, Ms. Price cut her target to $69 from $80 after adjusting her earnings expectations to “more normalized” post-COVID-19 levels and to value the company in line with Canadian consolidator peers. The average is $67.75.
Others making changes include:
* Scotia Capital’s Paul Steep to $65 from $67 with a “sector perform” rating.
* RBC’s Paul Treiber to $65 from $80 with an “outperform” rating.