Element Fleet Management Corp T.EFN

Alternate Symbol(s): ELEEF

Industrials

Element Fleet Management Corp. is a Canada-based fleet solutions providers. It operates as a pure-play automotive fleet manager. The Company offers a full range of fleet services and solutions to corporations, governments and not for profits across North America, Australia, and New Zealand. Its services address every aspect of clients' fleet requirements, from vehicle acquisition, maintenance, accidents and remarketing, to integrating electric vehicles' (EV) and managing the complexity of gradual fleet electrification. It offers a range of fleet solutions consisting of cost management; driver productivity and vehicle uptime; fleet electrification, lease vs ownership, sale leaseback, and others. Its fleet types include global; government and public sector; material handling equipment; sales, and heavy trucks. It offers fleet solutions to various industries, such as construction; energy, oil and gas; food and beverage; healthcare; services; transportation, and utilities.

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Element Fleet Management Corp

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Post by retiredcfon Mar 07, 2023 9:55am

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Post# 35323449

TD Raise Target

Element Fleet Management Corp.

(EFN-T) C$19.41

Revenue Growth and Originations Encouraging

Event

Q4/22 Results

Impact: POSITIVE

Revenue and adjusted EPS beat (vs. our and consensus forecasts). FCF/share was lower than our forecast for Q4/22, but it was above guidance for 2022 overall. Originations were above our forecast, vehicles under management (VUM) expanded q/q, and 2023 guidance was reaffirmed. Our estimates have changed modestly. Our target price moves up to $23.00 (from $22.00) due to the rolling forward of valuation by one quarter. We reiterate our BUY rating.

EPS of $0.27 was above our $0.26 estimate (and consensus); revenue was stronger than expected (+19% y/y, and +14% for 2022). Higher expenses offset somewhat. FCF/share of $0.30 was below our $0.33 estimate (deferred revenue was a drag), but $1.35 was above the high end of 2022 guidance ($1.32).
Revenue of $292mm was above our $272mm forecast (consensus was $270mm), reflecting organic revenue growth of 19% (14% for 2022). Servicing fees, net finance revenue, and syndication revenue all contributed.
2023 guidance was reiterated, and management noted “a growing conviction” in its ability to meet the high end of targets. We are at the high end for most revenue/earnings metrics. The company did lower its syndication volume expectations, citing the volatile interest rate environment.
Originations of $1.8bln were +54% y/y and above our $1.4bln forecast. Management noted that OEM production is improving. VUM was +2% q/q. An expanded mega-fleet mandate (16.5k vehicles) is expected to add 1% to 2023 revenue. The backlog ticked up slightly to $3.0bln (from $2.9bln q/q and y/y).
Capital returns were $56mm in Q4/22 (includes $25.5mm in share buybacks).
Conference call is at 8.00 a.m. ET (can access here). TD Investment Conclusion

The business has strong momentum, suggesting the timing is appropriate for a thoughtful CEO succession in 2023. We believe the combination of commercial momentum and a healthy order backlog will support the medium-term growth outlook. We are encouraged to see the origination growth this quarter. We believe translating the backlog into originations, further servicing growth, and syndication channels remaining open will be required to maintain the earnings and FCF/share momentum.