Buy DIRTT Environmental ahead of Q3 earnings, Laurentian says

Ahead of the company’s third quarter earnings, Laurentian Bank Securities analyst Elizabeth Johnston says DIRTT Environmental (DIRTT Environmental Stock Quote, Chart, News: TSX:DRT) is a buy.

On Wednesday, November 1 after market close, DIRTT will report its Q3, 2017 results. Johnston thinks the company will generate Adjusted EBITDA of $11.39-million on revenue of $85.26-million, a little better than street consensus of EBITDA of $11.30-million on a topline of $82.20-million.

Johnston says most of DIRTT’s growth will originate from south of the border.

“The majority of the growth is forecast to come from the U.S. segment, which includes an estimated $6.6M contribution from the recently increased Fortune 100 contract, offset by currency CADUSD translation headwinds (DRT reports in CAD; majority of sales are from the U.S. segment),” the analyst explains. “In Canada, sales levels have varied quarter to quarter, with the full year 2016 declining by 22% to $35.2M from $44.9M in 2015. In H1/17, we saw strong increases y/y but are cautious on this segment’s growth given historical variability.”

In a research update to clients Wednesday, Johnston reiterated her “Buy” rating and one-year price target of $9.50 on DIRTT, implying a return of 56.3 per cent at the time of publication.

Johnston says she will be watching closely for developments such as new customers and larger contracts, the rollout of new products, growth in new geographical markets and new verticals.