incomedreamer11 wrote: Ahead of the Aug. 13 release of its second-quarter results, Stifel analyst Daryl Young sees few near-term catalysts for Superior Plus Corp. (SPB-T).
“We are squarely in the summer doldrums for propane heating and given the overhang related to slowing O&G [oil and gas] markets; regardless, we think the 9-per-cent dividend yield is attractive and sustainable,” he said.
Noting the quarter is normally “seasonally weaker” for the Toronto-based company given the impact of warmer spring weather on its residential propane heating operations, Mr. Young is projecting adjusted EBITDA of $47.5-million, which is 4 per cent below the consensus estimate of $49.6-million but up 59 per cent year-over-year, “reflecting the Certarus acquisition, offset by an 6-per-cent year-over-year decline in adj EBITDA at the propane operating levels.”
“We are anticipating a challenging quarter given continued unseasonably warm weather across the U.S. and Eastern Canada which will temper propane volumes, combined with potential pricing/utilization impacts at Certarus from declining O&G activity,” he added. “Traditionally, Certarus has rapidly re-deployed its MSU fleet between utility customers across the winter (backup gas supply), into the U.S. O&G markets during spring/summer drilling season. However, given the slow down in drilling and completions activity this year, we see potential for a more competitive pricing environment.
“SPB’s shares have been under significant pressure in recent months, down 19 per cent, and are now arguably more than pricing in the current downside risks.”
Reaffirming a “buy” rating for its shares, the analyst trimmed his target to $12.50 from $13. The average is $12.
“We have conservatively reduced our Certarus assumptions for Q2/Q3 2024 to account for the O&G headwinds, trimmed our propane assumptions to account for the weather, and updated our FX rates,” he explained. “Our target price declines slightly to $12.50 from $13.00 on the back of the lower estimates. Our key focus for the quarter is the outlook for the utilization and profitability of the Certarus fleet; under the worst case scenario, whereby a deeper and more protracted O&G downturn occurs, we think Certarus (and its peers) would act rationally with a focus on profitability and temporarily dial-back MSU fleet growth (with a modest silver lining that it could reallocate FCF towards debt repayment).”