2023-05-17 16:19:30
Héroux-Devtek’s stock is currently trading at a multiple of just 7.4x expected operating profit in 2024. (Picture: 123RF)
What to do with the titles of Industries Lassonde, Héroux-Devtek and GDI Building Services? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion than that expressed by the analysts.
Industries Lassonde (LAS.A, $109.60): slight signs of progress, but patience is still required
The first quarter of 2023 for the producer of Oasis and Rougement juices is like the previous one. It is still difficult to establish “whether the glass is half full or empty” given the divergence between prices and demand for juices, says Frédéric Tremblay of Desjardins Capital Markets.
The analyst still fears that the price shock will accentuate and prolong the marked 5% decline in demand for juices and drinks. However, he remains hopeful that the Project Eagle strategic plan launched in 2022 will bear fruit over the next few years.
Signs of progress still encourage him to raise his target price from $125 to $130.
In the first quarter, sales rose 7.5% to $554.2 million, or 3.7%, excluding the currency effect. The higher prices more than offset the contraction in volumes, he says.
Overall, costs are still rising (especially for apple and orange concentrates), but profitability is improving thanks to higher turnover and lower general and administrative expenses, including transport costs.
In the United States, changes in the assortment of private label juice sales also boosted revenue growth in this market by 7.9%.
Operating profit therefore increased by 10.8% to $41.4 million in the first quarter.
On an adjusted basis, Lassonde estimates this operating profit at $43.1 million. It excludes the costs of its relaunch strategy, the costs of implementing new cloud computing systems and the adjustments to unrecoverable sales.
The 7.9% operating margin was unchanged year on year, but compared to 6.9% in the fourth quarter.
Prices remain the main source of internal revenue growth, but since the inflation of certain costs is stabilizing, the cumulative effect of price increases should affect profitability, foresees Frédéric Tremblay.
“The first quarter is encouraging and the valuation of the stock is very attractive (5.7 times the operating profit expected in 2023). For it to be upgraded, however, the stock needs revenue in terms of the number of units sold to improve, headwinds to subside (or internal initiatives to neutralize them), and margins to return to the normal. Patience is still required, ”he summarizes.
In the end, he still offers to keep the title.
Héroux-Devtek (HRX, $13.00): Transaction Reveals Manufacturer’s Bargain Value
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