Park Lawn Corp T.PLC

Consumer Cyclical Personal Services

Park Lawn Corporation is engaged in providing goods and services associated with the disposition and memorialization of human remains. The Company and its subsidiaries own and operate businesses, including cemeteries, crematoria, funeral homes, chapels, planning offices and a transfer service. Its primary products and services are cemetery lots, crypts, niches, monuments, caskets, urns and other merchandise, funeral services, after-life celebration services and cremation services. Its products and services are sold on a pre-planned basis or at the time of death. It has one stand-alone funeral home located in Durham, North Carolina; one stand-alone funeral home and one on-site funeral home and cemetery located in Abingdon, Virginia; eight stand-alone funeral homes, two stand-alone cemeteries and one on-site funeral home and cemetery located in and around the Savannah, Tennessee area; three stand-alone funeral homes located in Brampton, Woodbridge and Toronto, Ontario and more.

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Post by retiredcfon May 10, 2022 8:16am

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Post# 34669698

TD Preview

Park Lawn Corp.

(PLC-T) C$33.03

Q1/22 Preview: COVID-19 Impacts Moderating but Pre-need Strong Event

PLC will report Q1/22 results after market close on May 12. Conference call: 9.30 a.m. ET, May 13 (888-506-0062; ID: 367158).
PLC will also be converting into U.S. dollar reporting effective with its Q1/22 results. We have updated our estimates accordingly.

Impact: NEUTRAL

We forecast Q1/22 revenue growth of 22.5% y/y to $86.7mm and EBITDA of $21.4mm (consensus: $21.8mm), reflecting negative 2.0% organic growth and a 24.5% contribution from recent acquisitions. Our organic growth estimate assumes a continuation of strong pre-need sales and elevated average price per call, offset by declining volumes y/y, given the moderation of COVID-19 deaths. However, we believe there is possible upside to our estimates following stronger-than-expected results from Service Corp. International (SCI-N; not covered) and commentary that it continues to see elevated rates of excess deaths, despite a moderation of COVID-19-related deaths. Additionally, SCI increased its full-year 2022 guidance, reflecting expectations of continued robust customer spending on ancillary products/ services, combined with pre-need cemetery sales remaining elevated across all of 2022 (versus previous expectations of moderating pre-need sales volumes across 2022).

M&A update: PLC has remained active on M&A, announcing the acquisition of two new U.S. businesses, Chancellor and Hudson, since reporting Q4/21 results in March. Combined, these two businesses are expected to generate ~$2.1mm of EBITDA, with both acquisitions expected to close in Q2/22. We have updated our estimates for these deals accordingly. Looking forward, we anticipate that PLC will remain focused on tuck-under acquisitions, with a steady stream of announcements across 2022. However, we will be closely watching industry valuations as both SCI and CSV have highlighted strong acquisition pipelines and the potential for 2022 to be an active year. Granted, we acknowledge that the market remains highly fragmented, with significant runway for all three players.

TD Investment Conclusion

We are reiterating our BUY recommendation and C$47.00 target price. We continue to view Park Lawn as a high-quality company in a recession-resistant business with a favourable industry backdrop (including demographic tailwinds) and ample opportunities/capacity to grow through M&A.