A quarter that was worse than he expected has Echelon Wealth Partners analyst Ralph Garcea lowering his price target on Enghouse Systems (TSX:ENGH).
Last Thursday, Enghouse reported its Q3, 2017 results. The company earned $11.18-million on revenue of $82.8-million, a topline that was up 8.4 per cent over the $76.4-million the company posted in the same period a year prior.
Garcea notes that Enghouse missed his expecatations on both the top and bottom line. The analyst had modeled revenue of $87.7-million, Adjusted EBITDA of $25.1-million (ENGH posted EBITDA of $22.7-million) and EPS of $0.48, which was seven cents better than the actual $0.41 the company earned in the quarter.
Garcea says foreign exchange weakness, which he says has had an $8.2-million impact on top line performance year-to-date, was the culprit for the weak quarter. He sees this trend continuing.
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“We see continued FX headwinds as the USD weakness has persisted into the current quarter,” the analyst says. “ENGH derives ~70% of revenues outside the US.”
In a research update to clients today, Garcea maintained his “Buy” rating, but lowered his one-year price target on Enghouse Systems from $65.00 to $61.00, implying a return of 17 per cent at the time of publication.
Garcea thinks Enghouse will post Adjusted EBITDA of $89-million on revenue of $325-million in fiscal 2017. He expects those numbers will improve to EBITDA of $95-million on a topline of $351-million the following year.