Ahead of third quarter results from Dexterra Group (Dexterra Group Stock Quote, Charts, News, Analysts, Financials TSX:DXT), Beacon Securities analyst Kirk Wilson has trimmed his target on the stock. Wilson maintained a “Buy” rating on the stock in his Thursday client report while lowering his target from $11.00 to $10.60 per share, saying while challenges have persisted for the Canadian diversified products and services company, momentum is building over the second half of the year. Headquartered in Mississauga, Ontario, Dexterra has a range of facilities management services and workforce accommodation offerings, modular buildings and support services, with clients in both the public and private sectors. With a market capitalization of $345 million, Dexterra comes with a dividend yield of currently 6.6 per cent, while its share price has been dropping over the past 12 months. DXT started the 2021 year at around $6.50 and rose all the way to about $9.25 by mid-November last year. Since then, the stock has declined to now around the $5.50 mark. Wilson’s $10.60 target represented at press time a projected one-year return of 105 per cent. “Coming into the back half of 2022, Dexterra had a stated goal to have cost escalation clauses phased into contracts across all three divisions. While that has been taking place and will continue in this quarter as various contracts hit anniversary dates, the company continued to fight inflationary pressures and some project delays in Q3/22. That said, it appears most of the expected improvements in EBITDA margins should show up in Q4/22,” Wilson wrote. Wilson said management has guided for a three per cent EBITDA margin for the third quarter, due to be announced on November 8, with margins rising to the five to six per cent level by the first quarter of 2023. New affordable housing contracts in Toronto and strength in its US business should lead the way, according to Wilson, while there are likely to be some headwinds for Dexterra’s main Workforce Accommodations, Forestry & Energy Services (WAFES) division due to a slow ramp-up of occupancy at the company’s Crossroads Lodge. Delays at LNG Canada’s project site and a slow fire-fighting season were also factors. Wilson is expecting DXT to hit $243.9 million in third quarter revenue compared to $233.9 million for Q2 and heading to $240.3 million for the fourth quarter. On earnings, the analyst is forecasting $20.9 million in Q3 EBITDA compared to $13.6 million in the second quarter and rising to $22.1 million for the fourth quarter. All told, Wilson is estimating full 2022 revenue and EBITDA of $942 million and $74 million, respectively, and 2023 revenue and EBITDA of $1.031 billion and $94 million, respectively. “Overall, Dexterra should post an improved EBITDA margin Q/Q to 8.6 per cent on yet another record level of consolidated revenue when it releases its Q3/22 results next month, although we model EBITDA being down approximately seven per cent year-over-year to $20.9 million,” Wilson wrote. “We still expect the company to be over $1 billion of revenue in 2023 with EBITDA margins over nine per cent, driving $93.6 million of EBITDA next year. We have trimmed our target price to $10.60 as we maintain our 8.0X EV/EBITDA multiple. We maintain our Buy rating,” he said. For his valuation of Dexterra, Wilson has the 2022 EV/Revenue multiple at 0.5x and the 2023’s at 0.4x, while on EV/EBITDA 2022 is at 6.1x and 2023 is at 4.3x. The P/E is 20.1x for 2022 and 8.9x for 2023.