Third Quarter Near Expectations, Further Growth Expected
Raising Projections Slightly, Share Reaction Creates Opportunity
Q3 near estimates. Earnings of $0.06 per share were near our $0.07 projection
and substantially above a loss of $0.03 a year ago. For more information on
results relative to our projections, see our previous note.
U.S. remains growth driver. Revenue growth of 32% exceeded our
expectations, driven by growth in inspection and testing services as well as some
contribution from the recently acquired project management business. North
America revenue increased 69% in the period and included approximately 44%
organic growth. The revenue growth contributed to substantial margin gains,
reflecting solid execution and project timing. Additionally the company incurred
restructuring and problem project costs last year that did not repeat.
Raising projections slightly. Management reiterated its EPS projection of
$0.44-$0.48 per share for 2013 and indicated it expects no accretion from the
project management business this year. We are increasing our projections for Q4
2013 to incorporate less dilution from the transaction as well as continued growth
in North America. Our Q4 projections are within the implied guidance range of
$0.14-$0.18 per share. For 2014 we are increasing our projections assuming
continued organic growth in the U.S. as well as contributions from the company’s
project management acquisition.
Reiterate BUY rating. We view the shares’ negative reaction to the company’s
solid quarter and continued growth outlook as an opportunity. Our $12 price
target is unchanged and represents a 9x multiple of FY14 EV/EBITDA projections,
in line with peers. Furmanite is well-positioned to take share and leverage
additional service offerings across its global footprint, particularly in North
America. Given the current upside to our revised price target, we reiterate our
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