Héroux-Devtek is a buy, Desjardins says

Ahead of the company’s quarterly results, Desjardins Securities analyst Benoit Poirier likes what he sees from Héroux-Devtek (Héroux-Devtek Stock Quote, Chart, News, Analysts, Financials TSX:HRX).

On May 22, before market open, HRX will report its fourth quarter and fiscal 2024 results.

The street consensus is that HRX will post EBITDA of $26.5-million on revenue of $172-million, numbers that the analyst generally agrees with.

“In our view, the Street’s numbers are appropriately calibrated and we would be buyers ahead of the quarter despite the 27.8-per-cent year-to-date run-up in the stock,” he wrote in a research update to clients May 7. “The Street is forecasting only an $8-milllion quarter-over-quarter revenue increase, which is below the five-year average bump of $12-million quarter-over-quarter (recall that 4Q has been HRX’s strongest quarter seasonally). The Street is forecasting margin expansion of 40 basis points quarter-over-quarter, also below the five-year average of 100 bps. Moreover, 3Q EBITDA margin of 15.0 per cent (which beat consensus of 13.3 per cent) was unfavourably impacted by FX fluctuations (totalling negative $0.6-million). Stripping this out, EBITDA margin would have been 15.4 per cent.”

As reported by The Globe and Mail, Poirier May 7 maintained his “Buy” rating and price target of $26.00 on HRX.

The analyst agrued that there are macro tailwinds emerging in HRX’s sector.

“Among HRX’s supplier peers that have already reported results, nearly all players beat consensus, eight of 13 increased guidance and the average one-day stock price reaction to the results was 4.5 per cent,” he wrote. “The sector is clearly on fire as supply chain issues are beginning to ease and civil/defence demand continues to ramp up. The OEMs also reported positive developments. Boeing unveiled two new contracts that will benefit HRX (F/A-18 and MQ-25), Airbus now targets a rate increase on the A350 to 12/month by 2028 (up from 10/month by 2026; positive read-through for future 777X wide-body demand, although EIS could slip into 2026, according to Emirates and Lufthansa), and WSJ reported that Embraer is planning a new B737/A320-sized plane (opportunity for HRX).”