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Park Lawn Corp T.PLC

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.


TSX:PLC - Post by User

Post by retiredcfon May 15, 2023 12:24pm
169 Views
Post# 35448473

TD 3

TD 3

Park Lawn Corp.

(PLC-T) C$26.46

Solid Results; PLC Stick-handling the Tougher Environment Well Event

We are updating our estimates following the release of PLC's Q1/23 results. Adj. EBITDA of $20.5mm was in line with TD/Cons at $20.1mm. See First Look Here.

Impact: POSITIVE

Q1/23 results were largely in-line, with PLC doing a good job navigating the tough COVID-19-impacted comparison (this was the last of the exceedingly tough comps). Consolidated Q1/23 revenue increased 4.3% y/y to $86.7mm, reflecting recent acquisitions, partially offset by -5.6% organic sales (slightly below TD's -5.0% estimate). The negative organic sales reflect an 11.3% decline in funeral home call volumes, partially offset by a 1.5% price increase and increased merchandise/services sales. The decline in call volumes reflects a normalizing death rate post COVID-19, with the CDC reporting U.S. deaths down ~14% y/y.

Investor perceptions have been somewhat anchored to the view that PLC (and the broader death-care industry) was over-earning during the pandemic and that a significant deterioration in results is looming. No question results have been much more challenging in recent quarters, and we would be remiss not to highlight possible pandemic tail-risks that may still not be fully understood (e.g. pull-forward impacts) and headwinds from recessionary conditions on pre-need sales.

However, we are now four quarters into a more normalized post-COVID-19 environment, and PLC has stabilized results with a floor seemingly in place for margins (likely to remain in the 22-24% range near-term, in our view). Furthermore, we believe PLC has done the necessary retooling to provide increased managerial oversight and refocused its sales team in such a way that it can pivot rapidly to potential future curve balls. Also, the new FaCTS system is providing a greater degree of clarity and oversight into its properties/regions than ever before (including new segmented financial disclosures for Cemetery and Funeral properties).

M&A: We see PLC as well positioned to keep investing in its business while sourcing high-quality acquisitions given its manageable leverage ~2.8x (~2.1x, excluding equity-settled debentures), healthy FCF, and >$140mm of liquidity. Management noted that the pipeline is looking very strong, and alluded to potential for larger industry consolidation given interest-rate pressures.

TD Investment Conclusion

Our BUY recommendation and $34.00 target price remain unchanged.


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