Q1/24 BROADLY IN LINE; 2024 OUTLOOK LITTLE CHANGED
THE TD COWEN INSIGHT
Q1/24 adj. PS&PM EBITDA was modestly below consensus. That said, given both adj. PS&PM EPS and AtkinsRealis Services Segment adj. EBIT were very slightly above consensus, and full-year 2024 guidance was little changed, we have characterized the impact of the release as neutral. We remain positive on AtkinsRealis Services' outlook, and we continue to believe ATRL's stock offers attractive value.
Event
Q1/24 adj. PS&PM EBITDA was $175mm; modestly below consensus of $185mm and our $184mm estimate. For full-year 2024, ATRL raised its Nuclear segment y/y organic revenue growth outlook range; however, corporate PS&PM SG&A expense guidance was also increased (see details below).
Impact: NEUTRAL
AtkinsRealis Services continued to deliver strong results in Q1/24, generating organic revenue growth of 19.1% y/y and an adj. EBIT margin of 8.6% (vs. 8.5% in Q1/23). Engineering Services Regions segment revenue growth was +16.9% y/y (+17.9% organically), while adj. EBIT was $146mm (vs. consensus/TD at $145mm/$148mm). Nuclear delivered +22.2% y/y revenue growth (+20.9% organically), and realized adj. EBIT of $39mm (vs. both consensus/TD at $39mm).
Full-Year 2024 Guidance: Overall, full-year 2024 guidance remains largely unchanged. Although ATRL raised its Nuclear segment y/y organic revenue growth outlook range to 15%–20% y/y (vs. 12%–15% y/y growth, previously), Corporate PS&PM SG&A expense guidance was also increased to ~$130mm from ~$110mm (driven by higher long-term comp costs primarily due to ATRL's strong share price appreciation). Meanwhile, the company reaffirmed its guidance for all other metrics. That said, given the 17.9% y/y Engineering Services Regions segment organic revenue growth witnessed in Q1/24 (vs. full-year 2024 guidance of 8%–10% y/y organic growth) and positive momentum across essentially all end-markets, we suspect that there could be upside to management's guidance for this segment.
Regarding end-markets, ATRL noted that the pipeline for infrastructure projects in the U.S. remains very strong, and expects to see considerable growth opportunities in the infrastructure space over the next several years (in line with peers' expectations), which we believe would be supported partially by the expected ramp-up in IIJA-related spending in the U.S. Meanwhile, ATRL remains upbeat about its Nuclear business' near and long term outlook.
Although we have made various adjustments to our forecasts (including fine-tuning our revenue and margin expectations), overall, our estimates are little changed. Our $65.00 target price is unchanged.