QUIET QUARTER WITH IN-LINE Q3/24 RESULTS
THE TD COWEN INSIGHT
Q3/24 EBITDAS of $102.5 million was in-line with our estimate, and was driven by continued strong EBITDAS margins that exceeded the upper end of management's guidance. On valuation, CES trades at premium relative to the peer group, and we believe this premium is warranted given CES' ability to outperform broader industry fundamentals (2025E EBITDAS: +5.6% y/y). Maintain BUY, $11.00 target price.
Event: CES Energy reported Q3/24 results.
Impact: POSITIVE
Q3/24 Results: CES reported Q3/24 EBITDAS of $102.5 million in-line with our estimate, and 3.3% above consensus estimate of $99.2 million. Notably, EBITDAS margins of 16.9% exceeded the upper end of management's revised guidance range. Details on Page 4.
Return of Capital to Shareholders: In Q3/24, CES completed ~30% of its NCIB program that was renewed during the quarter repurchasing $46.0 million common shares. Historically, CES announces dividend increases with Q4 results, and we expect this trend to continue. CES could announce a more meaningful dividend increase given its share count has declined by over 10% and the higher EBITDAS run-rate of the business, in our view.
2024/2025 Capex Guidance: CES has increased its 2024 capital program to $85.0 million, up from $75 million "to support higher activity levels and business development opportunities". Management expects its 2025 capital program revert to $75 million.
Outlook Commentary: Management's outlook remains optimistic through the remainder of year with activity levels expected to remain steady, increased service intensity levels, and strong demand for specialty chemicals.
Estimate Changes: With Q3/24 results in-line with our estimates, we are not making any material changes to our go-forward estimates. Our updated estimates contemplate management's capex guidance above. Details on page 5.
Conference Call: Management will host a conference call on November 7, 2024 at 11:00 a.m. ET; dial: 1-844-763-8274