TDTheir revised target is $77.00. GLTA
Q1/24 RESULTS BELOW CONSENSUS; 2024 GUIDANCE REAFFIRMED, BUT GROWTH TO BE IN H2
THE TD COWEN INSIGHT
Q1/24 adj. EBITDA was 7% below consensus, and implied Q2/24 adj. EBITDA is below pre- quarter consensus. Still, encouragingly, AFN reaffirmed its 2024 adj. EBITDA guidance. Although some investor patience will likely be required where the stock is concerned (with y/y growth seen as a H2/24 event), we continue to like AFN's medium to long-term outlook, and we see the stock's valuation as attractive.
Impact: NEGATIVE
AFN's overall adjusted EBITDA margin performance was once again strong (15.9% vs. consensus/TD at 15.1%/15.5%). Adjusted EBITDA margin was +205bps y/y, driven
by gains in the Farm segment and lower corporate costs, partially offset by lower Commercial segment margins. Improved Farm segment margins were supported by manufacturing efficiencies, effective revenue management, and favourable mix. Lower y/ y sales hurt cost absorption in the Commercial segment.
Revenue of $314.6mm (-9.3% y/y) was below consensus/TD at $357.6mm/$362.4mm. Farm segment sales were +3.6% y/y, driven primarily by completion of several key projects for customers in Brazil. That said, AFN noted that in Q1/24, pockets of cautious purchasing behaviour were seen in North American Farm operations. Commercial segment sales declined 23.7% y/y, hurt by international deliveries timing (H2/24- weighted) and slower Canadian activity.
Outlook: Beyond reaffirming its 2024 adj. EBITDA guidance, in alignment with prior commentary, management noted that it expects full-year 2024's adjusted EBITDA margin to remain relatively flat y/y (was 19.3% in 2023), as margin drag associated with a
mix shift toward Commercial vs. Farm is expected to be mostly offset by the benefit
of incremental operational excellence gains. Regarding capital allocation, management guides to capex in the $70mm–$90mm range for full-year 2024.
- Estimate Changes: Our consolidated full-year 2024 and 2025 revenue and adj. EBITDA estimates are little changed; however, we have made various adjustments to our quarterly and segmented forecasts (most notably, H1/24 estimates have declined, while H2/24 estimates have increased).
Despite some headwinds facing the broader agriculture sector (including lower crop prices), we are encouraged by AFN's outlook, and we see the business as well-positioned to grow over our forecast period (supported by company-specific opportunities). Meanwhile, we see AFN's valuation as attractive.