Mullen Group Ltd.
(MTL-T) C$13.74
Q3/21 Results
Event
Mullen reported Q3/21 results.
Impact: POSITIVE
Q3/21 Results: Mullen reported Q3/21 EBITDAS of $64.6 million, essentially in line with our estimate of $66.1 million and consensus of $66.4 million. The Logistics and Warehousing (L&W) segment's performance exceeded our estimate, offset by lower- than-expected performance in its energy-weighted Specialized and Industrial (S&I) segment. Details on page 2.
Small Tuck-in Acquisition Disclosed: On October 1, 2021, Mullen acquired DirectIT, a Calgary-based courier and small package delivery company, for $15.3 million. This acquisition is consistent with management's continued focus on increasing its revenue exposure to consumer spending.
Outlook Commentary: The focus of Mullen's commentary this quarter was to highlight inflationary pressures, supply chain challenges and labour shortages, as well as the continued underinvestment in capital spending in Canada that continues to negatively impact its business. Despite these factors, management did indicate that these factors were material enough for the company to alter its guidance.
Estimate Changes: Consistent with the quarter and management's outlook commentary, our revised estimates now feature a modest increase in revenues, offset by lower margins to reflect inflationary pressures, as well as contributions from the DirectIT acquisition discussed above. As a result, our 2021, 2022, and 2023 EBITDAS estimates increase 0%, 1%, and 1%, respectively. We expect management to provide its 2022 business plan in December 2021 that typically includes revenue, EBITDAS, capital spending, and dividend guidance.
Conference Call: Management will host a conference call at 11:00 a.m. ET today; dial: 1-800-319-4610.
TD Investment Conclusion
Mullen Group has consistently generated strong financial performance throughout the COVID-19 pandemic, highlighting its resilient, diversified, and consumer-focused business, and we expect this to continue despite emerging concerns about broader inflationary pressures. With the quarter effectively in line, we are maintaining our BUY rating and $19.00 target price.