Industrials
A healthy earnings beat in 3Q24 - BRC is benefitting from expanded sales per customer, as it continues to roll out upgraded products and utilise increased digital advertising to reach a wider customer base. Sidoti lifts their FY24 EPS forecast to $4.12 and FY25 to $4.40, as they increase their long-term gross margin assumptions to ~51%. They introduce their FY26 EPS estimate of $4.68 based on 4% revenue growth and further improvement in operating margin. Sidoti models FCF per share growing to $4.19 in FY25 and $4.36 in FY26 (vs. $2.47 in FY24), as capex returns closer to maintenance level and cash conversion approaches 100%. TP increased to $80 (20% upside).
Edition: 187
- 31 May, 2024
Industrials
PDC business in the hot seat? BRC’s revenue growth over the past ten quarters has been negatively impacted by 50-100bps on average, as the healthcare segment has underperformed compared to the rest of the company. Management has a history of culling unprofitable SKU's as well as non-core assets; thus, Northcoast believes a sale of the segment (generating $100m+ in proceeds) is not out of the question. They believe the shares are undervalued as investors have failed to appreciate BRC’s ability to drive continuous EPS growth (14% CAGR since 2016) and the resilience of its business model. Even at their TP of $73, the shares would still be trading at a 30% discount to peers.
Edition: 181
- 08 March, 2024