TD takeSuperior Plus reported Q3/23 results.
Impact: SLIGHTLY NEGATIVE
Q3/23 Results: Superior reported adjusted EBITDA of $25.8 million, 5.8% below our estimate of $27.4 million and 8.5% below consensus of $28.2 million. Notably, sales volumes decreased 3%, 9%, and 4% year-over-year across its Canadian, United States, and Wholesale platforms, with encouraging improvements in gross margin per litre of 10%, 14%, and 11%, respectively, offsetting lower volumes. Certarus generated segment EBITDA of $35.5 million, 6% below our estimate of $37.6 million. Details on Page 2.
Full-year Guidance Reiterated: Management continues to guide to full-year adjusted EBITDA (including a full-year contribution from Certarus) of $630.0 million to $670.0 million. Importantly, this guidance is based on year-to-date actuals and fiveyear average temperatures. Recently, we reduced our 2023 EBITDA estimate to the low end of its guidance range to reflect a strong El Nio weather pattern (full report), and our relatively unchanged estimates remain at the bottom end of the range.
NCIB: Superior renewed its NCIB, allowing it to purchase up to 12.4 million shares between now and November 9, 2024. Board Succession: Michael Horowitz replaces Angelo Rufino as Brookfield's nominee to the Board of Directors, following Angelo Rufino's departure from Brookfield.
Estimate Changes: Aside from actualizing for Q3/23 results, we are not making any material changes to our 2023 and 2024 EBITDA estimates. Details on Page 3.
TD Investment Conclusion We believe Superior's core propane distribution business offers investors a resilient base of recurring free-cash-flow generation that will allow the company to continue to grow the Certarus business, deleverage, repurchase shares, and maintain the dividend. Certarus reduces the seasonality of Superior's operations, as shown in Q3/23 results, and provides Superior access to an early-stage, high-growth endmarket that offers fuel consumers an economic and environmental win-win. With our estimates largely unchanged, we are maintaining our BUY rating and $13.50/share target price.