Shares of Mullen Group Inc. (MTL-T) hit a 52-week high Thursday after the trucking and logistics company raised its dividend by 33 per cent and forecasted a stabilization of its business in 2021.
The Okotoks, Alta.-based company’s shares reached $11.61 in early trading before pulling back slightly. Mullen Group shares are up about 35 per cent over the past year. The stock hit a 52-week low of $3.85 in March.
Mullen Group said in a release after markets closed on Wednesday that its annual dividend will increase to 48 cents from 36 cents, to be paid monthly. It also expects revenue for 2021 to be in the $1.2-billion to $1.3-billion range, which is in line with analyst expectations of $1.23-billion.
The company said it’s basing its expectations on “the continued economic recovery and stable consumer spending,” and the expectation that infrastructure projects, such as the Coastal Gas and Trans-Mountain pipelines, to “continue and positively contribute” to its bottom line in 2021. It said its EBITDA will be in the $200-million to $220-million range for fiscal 2021, in line with expectations of about $214-million.
“Generally speaking, we are of the view that the ‘consumer-driven economy’ will continue to evolve and adapt as long as the health care crisis dominates the headlines,” stated chairman and chief executive officer Murray Mullen. “Within this context, our business will remain quite stable in 2021, in fact similar in most respects to 2020.”
The company also said it has a “very healthy cash balance” of more than $100-million that will be used to pursue acquisitions.
Canaccord Genuity analyst John Bereznicki reiterated his “hold” and $10.50 target on the stock after the news released late Thursday, saying he continues to view Mullen as “reasonably valued.”
BMO Nesbitt Burns analyst John Gibson increased his target price on the stock to $13 from $12 after the news, and maintained his “outperform” (similar to buy) rating “based on its strong balance sheet, defensive revenue streams, and solid valuation.”
Mr. Gibson said the dividend increase is still below its pre-COVID level of 60 cents annually, or 5 cents per month. “That said, we continue to believe it is only a matter of time before the company gets back to this level (pending the impacts of a vaccine play out as anticipated),” he wrote in a Dec. 10 note. He also said the company has “plenty of options” to pursue acquisitions in 2021.
The company temporarily suspended its dividend in March, when COVID-19 first hit and forced the temporary closure of many companies. The dividend resumed in July at a monthly rate of 3 cents per share, or 36 cents annually.
Mullen Group’s stock is up nearly 20 per cent over the past three months amid a broader market recovery as well as after the company reported third-quarter earnings that beat expectations
Its revenue fell 10.6 per cent year-over-year to $290.9-million due largely to lower demand for its services amid the fallout from COVID-19, but was ahead of expectations of $278.8-million. Adjusted net income was $25.6-million or 26 cents per share versus $16.5-million or 16 cents a year ago. Analysts were expecting adjusted earnings of 16 cents per share.
“Mullen has been among the best performing Canadian transportation stocks since the summer months — effectively regaining ground it lost in the earlier days of the COVID downdraft; though it is still lagging behind ‘pure-play’ transportation stocks year-to-date, where trading multiples have expanded relative to MTL’s,” stated Raymond James analyst Andrew Bradford in a Dec. 10 note. He has an “outperform” on the stock and target price of $11.25.
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