Dexterra Group has price target cut at Beacon

Following fourth quarter results that fell short of his expectations, Beacon Securities analyst Kirk Wilson has chopped his price target on Dexterra (Dexterra Stock Quote, Chart, News, Analysts, Financials TSX:DXT).

On March 7, Dexterra reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of $12.6-million on revenue of $270.5-million, a topline that was up 6.6 per cent over the same period a year prior.

Wilson summarized the quarterly results.

“Dexterra released Q4/23 results that fell well short of our forecasts due to $11.7 million of cost provisions in the Modular Solutions division,” he wrote. “Overall, adjusted EBITDA of $12.6 million was 46% below our expectations and was down 10% Y/Y. The EBITDA margin was 4.7% in Q4/23. DXT was able to convert a material portion of its $53.4 million of FCF into debt reduction as the company ended 2023 with long term debt of $90 million (down 33% Q/Q).

In a research update to clients March 11, Wilson maintained his “Buy” rating but cut his price target on the stock from $8.85 to $8.25, implying a return of 48 per cent at the time of publication.

The analyst thinks DXT will post EBITDA of $102-million on revenue of $1.14-billion in fiscal 2024. He expects those numbers will improve to EBITDA of $105-million on revenue of $1.20-billion in fiscal 2025.

“In the near term, we will watch to see if DXT is able to sell its Modular business and, if so, how that capital will be deployed for growth in the WAFES and IFM businesses,” Wilson concluded. “The goal of $1 billion/$100 million for revenue/EBITDA was reached in 2023 and we expect similar results in 2024. At a 5.0X EV/EBITDA multiple of our 2025 forecasts, we have trimmed our target price to $8.25. We maintain our Buy rating.”