A better than expected quarter has instilled more confidence in Industrial Alliance analyst Dylan Steuart that his “Strong Buy” rating on DH Corp. (DH Corp. Stock Quote, Chart, News: TSX:DH) is justified.
On Tuesday, DH Corp. reported its second quarter results for 2016. The company earned $5.4-million on revenue of $424-million, a topline that was up 14 per cent over the same period a year prior.
“Our Q2 results reflected strength in most of our key business solutions, offset by the ongoing impact of lower LaserPro renewals in 2016. In the quarter, we were pleased with the ongoing growth in our cash from operating activities, part of which we used to continue to repay debt,” said Gerrard Schmid. “We also announced changes to how we are organizing ourselves to operate more effectively on a global scale. We expect these changes to enhance our go-to-market capabilities, as well as to provide us with greater operating efficiencies. The global realignment is just one component of our strategy to streamline and improve the long-term growth of our business. We are also focused on continuing to invest in, and optimize, our product portfolio while enhancing our risk posture.”
Steuart says that following a disappointing first quarter, there was a lot riding on these results. He says the performance, which bested both his and the street consensus expectations across the board, should go a long way towards quelling fears.
“Given the degree that the results exceeded our estimates, we are increasing our estimates for 2016. While revenue expectations for the year remain stable at $1,709M given the higher margin development realized this quarter, we are increasing EBITDA ($493M, from $483M) and EPS ($2.35 from $2.24) forecasts for the year,” says the analyst. “Our forecasts for 2017 remain largely intact as increased expectations for the Integrated Core product line are offset by higher conservatism in our estimates regarding the Payments segment. As such, our EBITDA ($559M) and EPS ($2.85) estimates marginally increase, but our view remains the same for steady growth and improving margins in 2017.”
In a research update to clients today, Steuart maintained his “Strong Buy” rating and one-year price target of $46.00 on DH Corp., implying a return of 34.7 per cent, including dividend, at the time of publication.