The Clowns have made their researches (This morning Globe &MComments are exceptional and MTL to watch .
By the way,just bought on wednesday before market close,
It was for a ''swing''...
After Thursday’s release of second-quarter financial results that “significantly” beat expectations, iA Capital Markets’ Matthew Weekes sees the improved full-year guidance for Mullen Group Ltd. (
) as “conservative,” seeing momentum across its business segments.
Mr. Weekes was one of several equity analysts on the Street to raise revenue and margin assumptions for the Okotoks, Alta.-based logistics provider following the earnings report, which sent its shares soaring by 11.8 per cent on the day.
“MTL’s Q2/22 results were far above expectations, with tailwinds across the business,” he said. “MTL experienced strong demand and was able to more than offset inflationary pressures through fuel surcharge and rate increases, generating internal growth in logistics. S&IS segment revenues and margins significantly increased, driven in part by recovering oilfield activity where we believe we will see continued tailwinds.”
Mullen reported revenue for the quarter of $522-million, up 67 per cent year-over-year and above the estimates of both Mr. Weekes ($463-million) and the Street ($455-million). He said the result displayed “strong” performance across its segments due to fuel surcharge revenues, incremental revenue from acquisitions, and internal growth.
Adjusted earnings per share of 47 cents also blew past the analyst’s forecast of 23 cents.
“MTL noted that freight volumes remained strong in the LTL segment as consumer spending remains intact, while freight demand in L&W continued to improve,” he added. “Pricing increases contributed to internal growth, along with a degree of fuel surcharge arbitrage enabled by the relative fuel efficiency of MTL’s fleet. The S&IS segment, which includes oilfield-related activities, experienced a significant rebound of 51 per cent year-over-year , as high commodity prices led to a recovery in demand andpricingincreasesin these business units. Operating margins were above expectations across the board, as rate increases were more than able to offset inflationary pressures.”
In response to the results, Mullen raised its full-year revenue guidance to $2-billion from $1.6-$1.7-billion and operating income before depreciation and amortization of $300-million from $260-million.
“Incorporating the Q2 results and considering tailwinds for oilfield activity, typical seasonality in the business, and expectations for continued pricing stickiness and margin strength going forward, we believe $300-million is likely on the conservative side,” said Mr. Weekes.
“We are increasing our forecasts for 2022 above MTL’s revised guidance. We are assuming essentially flat OIBDA growth from 2022 to 2023 as we consider MTL’s commentary that acquisitions and capacity additions will likely be limited in the near term, while we believe potentially slower economic growth could bring more balance to freight markets and temper pricing leverage as time goes on.”
With the higher estimates, Mr. Weekes bumped up his target for Mullen shares to $17.50 from $15.50, keeping a “buy” recommendation. The average target on the Street is $16.45.
Elsewhere, Raymond James analyst Andrew Bradford upgraded Mullen to “strong buy” from “outperform” with an $18 target, rising from $14.50.
“Even with the move in the equity on the 2Q beat, Mullen is still priced at sub 6.5 times 2022 estimated EBITDA and just 6.0 times 2023 EBITDA,” he said. “On an earnings basis, MTL is priced at just 9.8 times 2022 and 10.3 times 2023. These are historically low multiples in both accounts — Mullen has not averaged below 7.0 times EV/EBITDA or 12 times EPS in any year over the last decade plus.
“The market is clearly pricing in a sharp reduction in EBITDA and earnings while Mullen’s updated guidance and 2Q results suggest at most a flattening of results in the second half of 2022. Combined with a tailwind from its exposure to the Canadian oilfield and asset divestment, Mullen should generate strong free cash flow 2H22, improve the balance sheet, and remain active on its share buyback program. This fortuitous fact pattern should ultimately attract buyers back into the equity and normalize the valuation.”
Other analysts making changes include:
* BMO’s John Gibson to $18 from $16 with an “outperform” rating
“Is It Sustainable? In our opinion, yes. MTL’s LTL business remains stable, while pricing increases are sticking,” he said. “A lack of drivers and trucks on the road is creating a positive pricing environment for Mullen (and counteracting continued supply chain issues), while the company’s efficient fleet is working in its favor in this higher diesel price environment. The company is also seeing a sizable pick-up in its oil and gas focused businesses, which we expect should last several years. If Mullen can produce a similar quarter in Q3 relative to Q2/22, its increased guidance of $300 million in EBITDA should once again be proven conservative.”
* RBC Dominion Securities’ Walter Spracklin to $17 from $15 with an “outperform” rating.
“MTL posted a Q2 result that came in significantly above expectations,” said Mr. Spracklin. “ Guidance was also raised meaningfully, well ahead of our and consensus estimates coming into the quarter. Overall, we are very positive on the print, and point to an attractive value opportunity with a mid-teen FCF yield on our 2023 estimate. While mgmt pointed to a slowdown in M&A reflecting macro uncertainty, we expect cash generation to provide good optionality into 2023. We continue to see value in MTL at these levels.”
* CIBC World Markets’ Kevin Chiang to $15.50 from $14 with a “neutral” rating.
* TD Securities’ Tim James to $17 from $14 with a “buy” rating.
MULLEN GROUP LTD
13.12+1.49 (12.81%)