Multiple Upgrades With its “diversified portfolio of companies across sectors/geographies” continuing to deliver “solid” results, Brookfield Business Partners L.P. is “recovering nicely from pandemic impacts,” according to National Bank Financial analyst Jaeme Gloyn.
On Friday, Brookfield reported better-than-anticipated fourth-quarter 2021 financial results, pushing its shares higher by 0.8 per cent in New York.
Adjusted earnings before interest, taxes, depreciation and amortization rose almost 30 per cent year-over-year to US$550-million, topping both Mr. Gloyn’s US$422-million projection and the consensus forecast of US$434-million. Adjusted earnings from operations per unit rose 36 per cent to US$2.69, also topping expectations (US$1.83 and US$1.81, respectively).
“BBU beat our expectations in all segments, enhanced its liquidity position through a preferred shares arrangement with Brookfield Asset Management and announced the acquisition of Cupa Group,” the analyst said.
Keeping an “outperform” recommendation, Mr. Gloyn raised his target to US$68 from US$63. The average is US$60.
“We hold a favourable view of BBU’s recent flurry of acquisition activity (SG Lottery, DexKo and Modulaire), including the upcoming creation of BBUC and eventual launch into the technology sector,” he said. “We anticipate BBU’s ongoing successful execution/integration will drive the shares higher. Our US$68 price target implies a valuation multiple of 8.8 times EV/EBITDA on our 2023E estimates.”
Other analysts making target adjustments include:
* Scotia Capital’s Phil Hardie to US$58 from US$56 with a “sector outperform” rating.
“BU delivered record Q4/21 results that were ahead of expectations and reflected a broad-based beat with all segments contributing higher-than-anticipated earnings,” he said. “Some seasonal benefits from Westinghouse and exceptionally strong underwriting from Sagen do not likely reflect a sustainable run-rate performance. That said, the quarter’s strong operational performance further underpin our confidence in BBU’s value creation potential.
“Some key themes coming out of 2021 and its fourth-quarter results include: strong value creation opportunities, high level of capital recycling, and increased financial flexibility. We expect the ability to deliver NAV growth in the mid-teens and improved recognition of the evolution of BBU’s portfolio quality to close its NAV discount over time.”
* iA Capital Markets analyst Matthew Weekes to US$58 from US$57 with a “buy” rating.
“BBU’s strong Q4 results strengthen our outlook for the Partnership, which we believe will continue to experience tailwinds and execute on growth and profitability initiatives across its portfolio, leading to continued growth in NAV,” said Mr. Weekes. “We are increasing our EBITDA estimate.”
* Desjardins Securities’ Gary Ho to US$59 from US$57 with a “buy” rating.
“BBU reported strong 4Q results. The overall portfolio update was positive and management sees further upside to its NAV, targeting +US$20/unit over the next few years. Integration of recent acquisitions will be a near-term focus. The addition of the BBUC structure should also broaden the investor base. We will continue to monitor the impacts from rising rates and inflation,” he said.