Mila (concept car division of Magna-Steyr) Alpin, 2008, seen at MOTOR SHOW ESSEN 2010 (Photo credit: Wikipedia)
MGA : NYSE : US$64.71
MG : TSX
Magna is a one of the world’s largest and most diversified Tier 1 automotive components suppliers, active in 25 countries. The company also provides
complete vehicle assembly services through its subsidiary, Magna Steyr.
Substantial Q1/13 upside surprise, guidance increased MGA reported EPS of $1.57, ahead of our $1.44 and the consensus mean $1.44. Positive surprises versus our forecast were on European sales and margins. 2013 guidance was also modestly increased.
We boosted our near-term forecast slightly given the guidance and boosted our mid-term forecast more significantly to model better European margins (but consistent with management’s goals). EPS was also boosted by our assumption that all of MGA’s current 12 million share buy back will be utilized, per management’s commentary.
Solid EPS growth expected
MGA produced 18% EPS growth in 2012 from strong North American sales and improved European margins. We forecast annual EPS growth
to slow to high single-digit to low double-digit rates through mid-decade from expectations of slowing industry growth in North America,
eventual gradual recovery in Europe, and modest margin expansion. Solid upside, with additional potential
We continue to recommend BUYing MGA for solid EPS growth, modest multiple expansion, and the potential for additional value creation from
cash deployment and/or business streamlining.
We expect EPS growth from forecast low- to mid-single-digit sales growth, based on booked business and gradual margin improvements in
Europe and Rest of World (ROW) segments.
We have boosted our valuation 0.5x to a 5.5x EV/NTM EBITDA multiple, as we think there is increasing investor interest in consumer growth
cyclical stocks like MGA. Our valuation and target is supported by our $77.61 DCF analysis.
Our target was boosted nicely (17%) this quarter based on the forecast increase, benefit from our usual one-quarter valuation period roll forward,
and the valuation boost.
Posted by jackbassteam on May 14, 2013
Image via CrunchBase
ENOC : NASDAQ : US$17.68
EnerNOC is a leading developer of clean and intelligent power solutions designed for commercial, industrial and institutional end users of electricity. The company’s proprietary demand response technology platform remotely monitors and reduces peak load demand across its diverse installed base.
With good cash flow, a healthy balance sheet, and growth initiatives aggressively moving ahead (water, international, big data), we maintain
our BUY rating into the important ‘16/’17 PJM auction (open May 13).
As expected, EnerNOC delivered a solid report in the seasonally slower Q1 period. Gross margins (+830bps y/y) and new application
and service offerings continue to impress, while 2013 stays on track with positive market developments (expected PJM reserve margin
shortfalls) and key new “tech” hires in place.
Guidance for ’13 is reiterated (revs $360-400M, adjusted EBITDA $62-77M), while international markets continue to progress nicely
(Australia/New Zealand/UK/Japan), and domestic opportunities (TX, irrigation, etc.) look to offer potential upside in ~’14.
Our 2013 GAAP estimates adjust to $391M/$0.60 from $380M/ $0.72, while 2014 estimates go to $485M/$1.07 from $475M/$1.02.
Pro forma EPS estimates for ‘13/14 are $1.46 and $2.00, respectively (from $1.44 and $1.75).
Our $20 target is based on a 4.7x EV/adjusted EBITDA multiple on our 2014 adjusted EBITDA estimate of ~$90.9M (from 83.0M).
Regulated end-markets, increased competition within the DR and EE markets and share price volatility.
Posted by jackbassteam on May 8, 2013
Progressive Waste Solutions (Photo credit: Wikipedia)
BIN : NYSE : US$22.79
BIN : TSX
Progressive Waste Solutions is currently the third largest fully integrated North American waste management firm by sales. The company operates in Canada and the United States with approximately 6,500 employees
Q1/13 beat driven by Superstorm Sandy cleanup. Progressive Waste (BIN) reported strong Q1/13 EPS of $0.24, beating our and the consensus $0.20 estimate. The beat was driven by a surge in revenues related to the cleanup of Superstorm Sandy; as these are not expected to continue, we do not ascribe much significance to the Q1/13 beat.
2013 guidance maintained.
Despite an outperformance in the quarter, BIN maintained its guidance for 2013. We continue to expect little growth in 2013E, followed by a much stronger performance in 2014E driven by easing competition, performance improvements, and the benefits of the ongoing infrastructure improvements.
Beyond 2013E, our thesis is unchanged. We continue to expect strong EPS growth and share price gains from: 1) stable organic revenue growth, 2) considerable acquired growth, and 3) solid margin expansion.
Maintaining BUY rating and increasing one-year target to US$25.50
We are increasing our target to US$25.50 from US$24.25 as a result of our usual one-quarter valuation period roll forward on our recovery
forecast. We have maintained our 7.25x EV to NTM EBITDA multiple in one year (in line with the current multiple) to reflect what we believe is a
valuation period that does not reflect the earnings potential of the company.
We are maintaining our BUY rating for the potential 14.3% ROR to our target, which includes the C$0.56 dividend (2.4% yield).
Posted by jackbassteam on May 3, 2013
Image via CrunchBase
ITRI : NASDAQ : US$39.85
Itron is a leading provider of advanced metering systems and intelligent infrastructure solutions for electric, gas and water utilities worldwide
PERFORMANCE DOESN’T MATCH POTENTIAL; BUY, TARGET TO $48.00
We expect that Itron will extend its leadership in the international advanced metering market over the next few years. 2013 looks to be a transition year as a new executive strategy, enhanced R&D plan and building order pipeline are geared to show results in 2014+ time frame.
An ugly start to the year, with a more challenging macro environment (Europe), project-specific issues and restructuring actions leading to a much weaker than expected Q1. While issues persist near term (austerity, competition, etc.), core business trends stay intact (b2b 1.0x), volumes continue to rebound in April and ~$47M in buyback dry powder helps to support shares.
With management talking down (but not yet updating) the outlook, we go ahead and drop below guidance ($3.00-3.25) as shares will likely remain range-bound through the summer on this issue. We stay constructive on improved trends and cash flow metrics longer term and find the current risk/reward more favorable.
Our 2013 revenue/non-GAAP EPS estimates adjust to $2.0B/$2.85 from $2.06B/$3.05 while our 2014 estimates remain $2.18B/$3.60.
Our $48 price target (from $50) is calculated using a 7.7x EV/EBITDA multiple off of our 2014 EBITDA estimate of $286M.
Utility-centric sales cycles are long, lumpy and subject to regulatory review, along with increased competition.
Posted by jackbassteam on April 30, 2013
English: CP Rail Loco in Thunder Bay ON (Photo credit: Wikipedia)
Canadian Pacific Railway Limited
CP : TSX : C$124.73
CP : NYSE: US$121.71
Canadian Pacific Railway, recognized internationally for its scheduled railway operations, is a transcontinental carrier operating in Canada and the US. Its 14,000-mile rail network serves the principal centers of Canada, from Montreal to Vancouver, and the US Northwest and Midwest regions. CPR feeds directly into America’s heartland from both coasts, and alliances with other carriers extend its market reach throughout the US and into Mexico.
All amounts in C$ unless otherwise noted.
Q1/13: SURGING RESULTS BUT FULLY VALUED
Much improved results, but not materially different than expected CP reported EPS of C$1.24 vs. the CG estimate of C$1.22 and the consensus mean of C$1.21. Q1/13 EPS was up 51% versus Q1/12.
Revenue was up 9% (1.2% better than we expected), and CP’s operating
ratio (OR) improved 4.3% to 75.8% (0.4% better than we expected).
In short, the quarter was a slightly better than we expected, but the
differences were not significant enough to materially change our forecast.
We continue to forecast strong EPS growth through 2016, assuming that
CP is successful in achieving its mid-60% OR target in that year. We
project EPS will increase from $4.34 in 2012 to $10.21 in 2016.
CP continues guiding to over 40% EPS growth in 2013 on good revenue
growth and further substantial margin expansion. Sales are expected to
increase in the high single-digit range, and the OR is expected to improve
to the low-70% range from 77.8% in 2012.
Management suggested that CP is ahead of schedule on improvements, so
there may be the potential for increasing the company’s EPS guidance. We
are already projecting a 45% increase in EPS for 2013.
Maintain SELL on return to target
Our target was increased mainly due to our usual one-quarter valuation
period roll forward. However, we maintained our SELL rating due to the
negative potential return to our one-year target and the limited forecast
return to CP’s OR improvement target period, 2016 (i.e., 6.1% annual
return over the next three years).
Our one-year target continues to be based on a relatively normal multiple
of 9.0x EV/NTM EBITDAR (9.0x Q1/14E EV to Q2/14E – Q1/15E
Posted by jackbassteam on April 26, 2013
Cogeco (Photo credit: Wikipedia)
CCA : TSX : C$44.88
Cogeco Cable is the 4th largest cable company in Canada, providing TV, Internet, and wireline telephony services in Ontario and Quebec. It also offers wireline business telecom services in its cable footprint and in the Greater Toronto Area through its subsidiary Cogeco Data Services. In November 2012, Cogeco acquired Eastern U.S. cable operator, Atlantic Broadband. Cogeco is controlled by the Audet family.
Despite 18% YTD stock price appreciation, we see good value – While there is significant integration risk associated with ABB and Peer 1, the stock trades at a pro forma EV to F2014E EBITDA multiple of 5.9x. This compares with 7.1x for Shaw, a U.S. cable average of 6.9x, and a Canadian telco average of 6.7x. We believe there is still upside from FCF accretion from Atlantic Broadband, and Peer 1 is expected to generate positive FCF from F2014. Cogeco Cable’s F2014E pro forma FCF yield is a sector leading 8.9%.
Expect solid FCF contribution from ABB – Cogeco Cable will report FQ2/13 results during the evening on April 10. We do not expect Peer 1 to be
consolidated until FQ3/13. For FQ2/13, we expect revenue of $415 million or 30.6% YoY growth driven by the ABB acquisition. At $188 million, our EBITDA estimate is slightly below consensus of $190 million and implies 30.8% growth. Our recurring EPS estimate of $1.11 is above consensus of $1.09 and compares with $0.64 in FQ2/12.
Finally, we expect $45 million of FCF vs. consensus of $44 million and the $18 million in FQ2/12.
Expect 4% revenue and EBITDA growth from Canadian operations – We expect combined Canadian cable and CLEC revenue of $330 million or
3.7% growth. At $157 million, our Canadian EBITDA forecast compares with consensus of $159 million and assumes a YoY increase of 4.3%. We
expect Canadian cable revenue and EBITDA growth to be driven by an estimated 1.6% YoY increase in total PSUs and price increases.
We expect guidance to be updated to include Peer 1 in FH2/13 – We expect F2013 EBITDA guidance to be raised to around $765 million from $735 million due to the inclusion of Peer 1. However, we expect FCF guidance to be reduced to around $160 million from $170 million due to dilution from Peer 1.
Reducing discount rate assumption to 9% from 10% to reflect sector multiple expansion and FCF accretion – This increases our target price to C$50.00
(F2014E FCF yield of 8.0%) from C$44.00 (F2014E FCF yield of 9.1%).
Posted by jackbassteam on April 11, 2013
AYI : NYSE : US$71.84
Acuity Brands is one of the world’s largest lighting products and services companies. The company primarily serves the North American indoor and outdoor commercial/industrial luminaire market through more than a dozen separate brands with a particular emphasis on fluorescent and HID technologies. Headquartered in Atlanta, GA, the company employs over 6,000 people, and has hundreds of separate lighting and controls product families.
We maintain our BUY rating on AYI shares as we continue to believe the company outperforms during the macro recovery and adds incremental value throughout this secular transition to intelligent lighting and controls.
No surprises in Acuity’s conference call. Revenue upside in the seasonally weakest quarter was driven by pent-up demand delayed from FQ1. Slightly offsetting this growth was the mix of these projects, including renovation, national accounts and the home improvement channels, which weighed slightly on GMs sequentially. Acuity remains optimistic for 2013/2014, although with a hint of its usual caution.
While SD&A spending grew a bit faster than revenues this quarter, Acuity has historically executed over the previous cycles in slowing overall OPEX relative to revenues. We also point out that adjusted OMs are at the same level as last year, but with 2.5x the LED revenues. This helps counter the negative thesis that LED is either dilutive or will require higher spending to develop and support.
There are likely more positive than negative catalysts in the near term, such as Light Fair and entering the seasonally strongest period.
Despite the momentum and expectations of continued execution, we are already bumping up against a reasonable upper limit in the model and feel the same about sentiment given current levels of visibility.
We continue to like the company’s position over the long term but prefer shares on pullbacks given limited room for incremental upside to estimates. We may reassess our position should the shares trade up to our price target, which is looking more like fair value at this point.
Posted by jackbassteam on April 5, 2013
FTP : TSX : C$10.00
Fortress Paper is a producer of security papers, wallpaper and pulp. Fortress operates three mills, the Landqart Mill located in Switzerland, the Dresden Mill located in Germany and the Fortress Specialty Cellulose Mill located in Thurso, Quebec, Canada
Fortress Paper announced that it has entered into an agreement to sell its Dresden wallpaper mill to Glatfelter Gernsbach GmbH & Co. KG for Euro160 million or approximately $213 million, subject to working capital adjustment. Accounting for the debt associated with Dresden, and taxes, FTP is likely to realize net proceeds of approximately $150 million. We had previously estimated that Fortress could monetize the asset for $180-200 million. We view the announcement as positive as it significantly improves Fortress’ balance sheet which had cash of $31 million and debt of $255 million as of the end of December 2012.
We expect the proceeds of this transaction to be used in part to fund FTP’s LSQ conversion. The company expects to announce a revised timeline and estimated capex late Q2/early Q3 this year. Previously, Fortress had estimated capex at $222 million, with $132 million in funding from Investissement Quebec. In our view, this materially improves the balance sheet and should provide comfort to investors that it can service its interest costs on its debt while also having excess cash on the balance sheet, in addition to funding the LSQ conversion. Furthermore, Landqart is now running at full production rates and approaching breakeven EBITDA. We also expect Thurso to turn positive in H2/13 once various improvements can be implemented and the co-gen is online (Q2/13E).
We are raising our 12-month target price on Fortress to C$13.00 (from C$11.00), which implies an EV/2014E EBITDA of 5.5x, on an estimated pro-forma basis following the closing of this agreement and excludes LSQ due to the uncertain timing of production at this time. We are reiterating our BUY rating based on our belief that Thurso and Landqart will continue to improve operating performance in H2/13.
Our revised C$13.00 target price implies an EV/2014E EBITDA multiple of 5.5x
Posted by jackbassteam on March 15, 2013
SNC-Lavalin (Photo credit: Wikipedia)
SNC : TSX : C$43.01
SNC-Lavalin is one of the leading engineering and construction groups in the world and a major player in the ownership of infrastructure, and in the provision of operations and maintenance services. SNC-Lavalin has offices across Canada and in over 35 other countries around the world, and its 24,000 employees are currently working in some 100 countries. All amounts in C$ unless otherwise noted.
Despite SNC missing Q4/12 expectations and issuing surprisingly weak guidance for 2013, we are maintaining our BUY rating as we see an
attractive reward-to-risk profile. We continue to peg downside potential at $38.00 based on trough EPS (ex. ICI), a trough 9x multiple, $23.00 for
the ICI, and $355 million in fines/penalties. Thus, potential upside to our C$53.00 target (cut from C$55.00) outstrips potential downside 2:1. We
see significant upside potential as margins should normalize in the out years.
At $2.2 billion, Q4/12 revenue (ex. ICI) exceeded our estimate by 12%, with all segments less O&M higher than expected. Negative cost reforecasts
totalling $77 million left EBITDA (ex. ICI) at $51 million. Excluding this, EBITDA (ex. ICI) would have been in line with our $128 million estimate. EPS (ex. ICI) came in at $0.16 vs. our $0.50 estimate.
Management initiated 2013 guidance of 10-15% EPS growth on the $2.04 earned in 2012. At the mid-point, this implies 2013E EPS (ex. ICI) of $1.37. Previously, we expected $1.85 in EPS (ex. ICI) and have taken our estimate down to $1.45 and 2014 to $1.95 from $2.20. Power and
ICI should be strong, H&C weak, while M&M could be the swing factor. Numerous legacy contracts are underperforming, weighing on margin.
The AGM in May is shaping up to be a key potential catalyst for SNC.
Bob Card, CEO, is expected to unveil the strategic plan going forward.
Posted by jackbassteam on March 12, 2013
John Deere 2130 Tractor (Photo credit: Odalaigh)
DE : NYSE :
The Big Green Profit Machine.
Deere saw a 22% increase in its Q1 earnings, driven by better sales in North America. Deere reported a profit of $649.7 million, or $1.65 a share, versus a year-earlier profit of $532.9 million, or $1.30 a share. Total revenue, which includes Deere’s finance unit, grew 10% to $7.42 billion.
Analysts had forecast earnings of $1.40 a share on $6.72 billion in total revenue.
The company’s overall equipment sales in the U.S. and Canada, including construction and forestry equipment, rose 18% during the first quarter from a year earlier. The company now expects to earn $3.3 billion in profit this year, implying earnings per share of $8.45. The company had previously forecast $3.2 billion in profit.
Deere expects equipment sales to rise 6% this year to $35.5 billion, up from 5% previously. Analysts had expected the company to earn $8.37 a share from sales of $35.2 billion.
Posted by jackbassteam on February 15, 2013