Industrials
BTN sees several reasons to question how sustainable recent results really are. Standard payment terms are net 30 days for BRC, yet DSOs have climbed to 56 days and have been rising steadily for some time. In 6 of the last 8 quarters, organic growth benefitted from price increases, while underlying organic growth remains <3%. FX tailwinds have also aided recent results. Given these factors, BTN questions whether true organic growth exists at all and one thing that history has proven many times is that growth through acquisition stories often underperform when organic growth turns negative. Additional accounting red flags inflating earnings include lower bad debt reserves, reduced depreciation from aging equipment and acquisition accounting that excludes goodwill and intangibles amortisation.
Edition: 227
- 09 January, 2026
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