Following the company’s second quarter results, Laurentian Bank Securities analyst Nick Agostino is feeling a little more bullish about Kinaxis (TSX:KXS).
On Thursday, Kinaxis reported its Q2, 2018 results. The company earned (US) $4.26-million on revenue of $39.0-million.
“Q2 represented another strong quarter for Kinaxis — both the top and bottom line,” CEO John Sicard said. “We had record revenue from Europe, which reaffirms our decision to invest significant sales and operations resources in the region. We see even greater opportunity ahead as the expanded European team continues to engage with prospective accounts across all market verticals, but particularly consumer packaged goods, automotive and life sciences. During the quarter, we launched our self-healing supply chain application applying advanced machine learning algorithms to detect key supply chain design gaps and automatically take corrective action before they impact performance. We also announced a number of new customers across regions and verticals, including top-tier brands such as Volvo, Ipsen and Extreme Networks, and provided some insight into the success we have been having at our existing customer, BASF. There is no greater testament to the proven transformative value of our unique concurrent planning technique than its ability to serve leaders in such different industries, all from the same cloud-based platform.”
Agostino notes that this quarter bested his expectations on both the top and bottom lines. He points out several areas of strength moving forward.
“With the strong quarterly results, increasing traction in international markets, and higher visibility provided by an increased Subscription services backlog, our thesis remains unchanged,” the analyst says. “Furthermore, in light of the potential impacts of recently introduced trade tariffs and the volatility they introduce into large enterprise supply chains, we believe KXS’s value proposition is strengthened even further. The quarter confirms that KXS is continuing to drive growth (~65% of which is coming from new customers), supported by a diversified customer base across verticals and an accelerating penetration into Europe. Post the conference call, we expect this trend to continue as the company grows its presence in Europe, where it expects to sign additional SI partners in the near-term, as well as Asia. We think the company’s sales pipeline could be further strengthened by the recently-introduced process manufacturing vertical, with BASF (signed in 2016) serving as a key reference client, and opens up opportunities in Food & Beverage.”
In a research update to clients today, Agostino maintained his “Buy” rating, but raised his one-year price target on Kinaxis from $98.00 to $105.00, implying a return of 16.7 per cent at the time of publication.
Agostino thinks KXS will generate EBITDA of (US) $45.2-million on sales of $156.0-million in fiscal 2018. He expects those numbers will improve to EBITDA of $60.0-million on a topline of $191.1-million the following year.
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