Q3/24 FIRST LOOK; FOCUS ON MARGIN & M&A DRIVE SOLID RESULTS
THE TD COWEN INSIGHT
Mullen reported Q3/24 EBITDA of $95.3 million vs. TD/cons at $90.4/$89.5 million, and up 8% y/y. Diluted EPS of $0.41 vs. TD/cons at $0.32/$0.36. Greater-than-forecast EBITDA in three of four segments (and EPS), combined with low valuation, should be positive for the share price. No formal change yet, but EBITDA guidance set out at beginning of year appears conservative.
Impact: POSITIVE
Mullen reported higher-than-forecast EBITDA due to LTL, L&W, S&I, and potentially some help from the short-lived rail strike. We believe the strong margin performance in LTL and L&W (up 110 and 130 bps y/y, respectively, despite limited freight demand growth and pricing power) and M&A commentary should be the focus while commentary regarding broader industry supply/demand challenges (Canadian consumer and capital investment) should not be surprising and/or incrementally important for the stock. The cc typically provides full year guidance insights. FY guide appears increasingly achievable.
Revenue increased 5.6% y/y to $532 million (TD: $519 million). The difference vs. forecast due to S&I ($132 million vs. TD: $121 million; +5.1% y/y), L&W ($169 million vs. TD: $164 million; +23% y/y), and US 3PL ($45.7million vs. TD: $43.6 million; -6.4% y/y), partially offset by LTL ($189 million vs. TD: $192 million; -2.8% y/y). L&W growth due to ContainerWorld acquisition.
EBITDA increased 7.6% y/y (+5% vs TD) to $95.3 million, 17.9% margin; +30 bps y/y (TD: $90.4 million; 17.4% margin). LTL $35.7million, 18.9% margin, +110 bps y/y (TD: $34.9 million; 18.2% margin). The increase in margin was due to operating efficiencies and restructuring at B&R (closed in Q2/23), partially offset by lower freight demand. L&W $35.2 million, 20.8% margin, +130 bps y/y (TD: $31.2 million; 19.1% margin). The increase in margin was due to maintenance and cost control measures, partially offset by freight demand. S&I $28.5 million, 19.4% margin, -110 bps y/y (TD: $27.4 million, 22.8% margin).
Outlook: Unchanged, with continued demand softness, also characterized as 'stable' by management, lower capital investment in Canada, competitive pressure, and limited opportunity for price increases.