National Bank raises price target to $6.25 National Bank Financial analyst Ahmed Abdullah expects AirBoss of America Corp. (
) to exhibit sequential revenue and earnings gains after a difficult end to the last fiscal year when it reports its first-quarter results on May 8.
“[AirBoss Rubber Solutions] saw a significant pullback in orders towards the end of 4Q as customers focused on destocking, with some of that softness spilling into the early part of January,” he said. “Since then, February & March orders saw sequential improvements. We still expect 1Q ARS revs to be down 10 per cent year-over-year but a 10-per-cent quarter-over-quarter improvement. ARS EBITDA should be relatively flat year-over-year at $6.0-milllion as better margins (11.0 per cent vs. 10.0 per cent) will help offset top-line pressure. Results should improve for the segment as the year unfolds with the onboarding of 23 new customers in 2024. At [AirBoss Manufactured Products], the UAW strike was resolved in 4Q, however, 1Q customer volumes within the auto sector remain impacted by higher interest rates, and no new defense contracts have been awarded. As such, we see AMP revs down 25 per cent year-over-year or down 1.4 per cent quarter-over-quarter, and EBITDA of $2.2-million down 69 per cent year-over-year as 1Q23 featured catch-up payments as a result of renegotiated customer agreements.”
Mr. Abdullah currently projecting total net sales for the quarter of $96.9-million, down 17.2 per cent from the same period a year ago and below the Street’s forecast of $105.3-million. His total adjusted EBITDA estimate of $5.4-million is a drop of 47.5 per cent and also under the consensus of $6.2-million.
“On March 27, BOS announced that it amended its senior secured revolving credit facilities, which included a downsizing of the facility, a dividend cut and capex limits in 2024/2025,” he said. “With this amendment, the Company also replaced its covenant ratios in 2024 with minimum Adj. EBITDA and liquidity requirements. Per the amended agreement, consolidated Adj. EBITDA needs to be higher than $3.9-milllion in 1Q, $5.6-milllion in 2Q, $7.6-milllion in 3Q and $6.9-milllion in 4Q. Our current quarterly forecast sits higher than these minimums. Additionally, BOS is to maintain minimum liquidity of $20-milllion throughout 2024. In 2025, covenants will get reinstated with leverage not to exceed 4.75 times at 1Q25, 4.25 times at 2Q25 and 3.75 times thereafter until the facilities’ maturity date (9/23/26).”
With changes to his capex and dividend estimates in response to the amended credit agreement, Mr. Abdulash bumped his target for the Newmarket, Ont.-based company’s shares to $6.25 from $6 with a “sector perform” recommendation. The average is $6.47.