Raymond James analyst Michael Barth has upgraded Mullen Group (MLLGF, Financial) from Market Perform to Outperform, revising the stock's price target to C$16.75 from C$17. This decision comes despite the company having reported an EBITDA miss in their recent earnings. According to Barth, the quarter's results indicate positive trends in organic revenue growth, suggesting that the company's EBITDA could potentially witness a rebound later this year.
In recent performance metrics, Mullen Group's stock has underperformed compared to the TSX by 15% year-to-date and 26% in the past year. The analyst sees this as an improvement in the risk/reward dynamics for investors. This evaluation signifies a potential turning point for the company's stock, as anticipated organic growth may bolster its financial performance in the upcoming quarters.
Key Business Developments
Release Date: February 13, 2025
- Revenue: Approximately $500 million in Q4, flat compared to the prior year.
- OIBDA: $85 million in Q4, $332.2 million for 2024.
- Cash Flow from Operating Activities: $92.9 million in Q4, approximately $340 million for 2024.
- LTL Segment Revenue: $189.4 million, slight decline due to lower fuel surcharge revenue.
- LTL Segment Operating Margin: Improved to 16.6%.
- L&W Segment Revenue: $160.9 million, up $20.1 million from last year.
- L&W Segment Operating Margin: Virtually flat at 20.6%.
- SI Segment Revenue: Down $18.7 million to $103.8 million.
- SI Segment OIBDA: Down $8.4 million to $16.2 million.
- US 3PL Segment Revenue: Flat at $47.5 million.
- US 3PL Segment Operating Margin: Improved to 28.2% on a net revenue basis.
- Cash on Hand: Approximately $126 million at the end of 2024.
- Undrawn Bank Credit Facilities: $525 million available.
- Total Net Debt to Operating Cash Flow Covenant: 2.24 to 1 under 2024 notes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mullen Group Ltd (MLLGF, Financial) maintained stable financial performance despite a challenging macro environment, generating $6 billion in revenue and nearly $1 billion in OIBDA over the past three years.
- The company completed five acquisitions in 2024, which helped offset the lack of new capital projects and contributed to flat financial results.
- The LTL segment showed resilience with a nearly 1% improvement in operating margin, despite flat revenues due to lower fuel surcharge revenues.
- The L&W segment saw a 14.3% revenue increase, driven by acquisitions and strong performance from key business units.
- Mullen Group Ltd (MLLGF) maintains a strong balance sheet with $126 million in cash and $525 million in undrawn bank credit facilities, providing ample liquidity for future investments.
Negative Points
- The macro environment in Canada is described as a 'no growth economy,' with lingering issues in the transportation and warehousing industry due to inventory rebalancing and excess capacity.
- The SI segment experienced a tough quarter with a 15.3% decline in revenues due to the completion of major pipeline projects and a lack of new opportunities.
- Operating margins remain under pressure in the US 3PL and international logistics segment due to competitive markets.
- Mullen Group Ltd (MLLGF) faces challenges from elevated costs due to inflation and legacy facility lease costs.
- The company is cautious about future acquisitions due to structural changes in the transportation and warehousing industries, indicating a potentially prolonged competitive environment.
