On today’s TSX Breakouts report, there are 53 stocks on the positive breakouts list (stocks with positive price momentum), and four stocks are on the negative breakouts list (stocks with negative price momentum).
The security highlighted today appears on the positive breakouts list. It has delivered positive returns to unitholders since 2007. Year-to-date, the unit price is up over 14 per cent. The security has a unanimous buy recommendation from 13 analysts.
Discussed below is Boyd Group Income Fund (BYD.UN-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
Winnipeg-based Boyd Group operates a network of non-franchised collision repair centers across North America, mostly in the U.S., under banners such as Boyd Autobody & Glass, and Gerber Collision & Glass. Boyd Group also operates auto glass shops across 34 U.S. states under banners such as Glass America, Auto Glass Service, and Auto Glass Authority.
The majority of Boyd’s revenue is from south of the border with between 15 per cent to 20 per cent of sales from Canada and the remainder from the U.S. The Fund benefits from a higher U.S. dollar. Boyd Group is the one of the largest retail auto glass operator in the U.S. Furthermore, over 90 per cent of its revenue is generated through insurance carriers such as State Farm Insurance, Allstate, and Geico.
Before the market opened on Nov. 14, the Fund reported earnings that were just shy of expectations. Sales came in at $459.6-million, up 17.3 per cent year-over-year, and in-line with the consensus estimate of $458.6-million. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $41.2-million, up 15.9 per cent year-over-year, just shy of the consensus estimate of $42.5-million. Adjusted net earnings per unit was $1.04, below the Street’s expectations of $1.07 cents per unit. Normalized same-store sales expanded 3.6 per cent. The unit price rallied 7.5 per cent over the next two trading sessions.
Acquisition growth remains a key corporate objective, which is helping drive the Fund’s top line growth. Management remains focused and committed to doubling the size of its business over a five-year period ending in 2020, equating to an average annual growth rate of 15 per cent. The company operates in a highly fragmented industry, allowing Boyd to grow through acquisitions.
On the earnings call, chief executive officer Brock Bulbuck provided a bullish outlook on future acquisition opportunities stating, “The M&A (merger and acquisition) pipeline continues to be strong, healthy. We continue to have a wide variety of opportunities from both start-up opportunities, the single location acquisitions through to small and mid-sized MSO’s (multi-store operations), so the pipeline is healthy. As we stated in the past, getting them across the line can sometimes be lumpy, but certainly we feel very good about where our pipeline is now.”
On the call, Mr. Bulbuck’s also remarked on several challenges, “Going forward into Q4 and Q1 (fourth quarter and first quarter), in addition to normal seasonal slowdown for glass, we do expect our glass business to face some headwinds from both customer loss and a price reduction from a major customer.” He also noted, “Technician capacity is still a constraint for us. It's not enabling us to process all of the opportunity that we have from the strong demand for our services.”
Boyd Group will be reporting its fourth-quarter financial results before the market opens on Thurs. March 21. That day, management will host an earnings call at 10 am (ET).
The consensus revenue, EBITDA and earnings per unit estimates are $476-million, $43.8-million and $1.08, respectively.
Boyd Group pays its unitholders a monthly distribution of 4.5 cents per trust unit, or 54 cents per unit on a yearly basis. This equates to an annualized yield of 0.4 per cent. Annualized distributions have increased by 9.8 per cent since 2014. Management has announced distribution increases for 11 consecutive years.
The payout ratio is conservative, suggesting the distribution is sustainable. As of Sept. 30, the payout ratio based on adjusted distributable cash for the trailing 12-months was 7.6 per cent.
The Street is forecasting EBITDA of $170-million in 2018, up from $146-million reported in 2017, and expected to rise to $200-million in 2019. Earnings per unit is anticipated to come in at $4.24 in 2018, up from $3.18 reported in 2017, and rise to $4.98 in 2019.
In recent months, financial forecasts have been relatively steady. For instance, three months ago, the consensus EBITDA estimates were $169-million for 2018 and $198-million for 2019, and earnings per unit expectations were $4.22 for 2018 and $4.97 for the following year.
There are 13 analysts that cover this Fund and all 13 analysts have buy recommendations.
The firms providing research coverage on Boyd are as follows in alphabetical order: AltaCorp Capital, BMO Capital Markets, CIBC Capital Markets, Desjardins Securities, Cormark Securities, GMP FirstEnergy, Jefferies, Laurentian Bank Securities, Macquarie, National Bank Financial, Raymond James, Scotiabank and TD Securities.
Earlier this month, Steve Hansen, the analyst from Raymond James, increased his target price to $145 from $125. Maggie MacDougall, the analyst at Cormark Securities, lifted her target price to $134 from $124.25.
In Feb., David Newman, the analyst at Desjardin Securities, trimmed his target price by $2 to $138.
According to Bloomberg, the security is trading at an enterprise value-to-EBITDA multiple of 13.5 times the 2019 consensus estimate, above with its three-year historical average multiple of 12.2 times but below its peak multiple of over 15 times during this time period.
The consensus one-year target price is $136.67, suggesting the Fund may deliver a price return of over 5 per cent over the next 12 months. However, future acquisition announcements could increase the consensus target price and the anticipated return.
Target prices range from a low of $126 (from Michael Glen, the analyst at Macquarie) to a high of $145 (from Steve Hansen, the analyst at Raymond James and Zachary Evershed, the analyst at National Bank Financial). Individual target prices are as follows in numerical order: $126, $132, $134, six at $135, $137, $138, and two at $145.
Insider transaction activity
Year-to-date, there have not been any transactions in the public market reported by insiders.
Between Nov. 19 and Nov., 28, president and chief operating officer Tim O’Day sold a total of 75,000 units at an average price per unit of approximately $110.668, reducing his account’s holdings to 53,174 units.
Between Nov. 19 and Nov. 28, chief executive officer Brock Bulbuck also sold a total of 75,000 units at an average price per unit of roughly $110.668, leaving 18,161 units in his account.
The long-term chart is attractive. The unit price has been in a multi-year uptrend that was briefly breached in the fourth quarter of 2018. However, the unit price is recovering, rising over 14 per cent year-to-date.
Looking back over the past several years, the unit price has consistently provided investors with gains. Last year, while the S&P/TSX composite index slumped in 2018, Boyd’s unit price rallied 12 per cent. In 2017, the unit price climbed 18 per cent. In 2016, the unit price increased 29 per cent . In 2015 and 2014, the unit price rose 39 per cent and 44 per cent, respectively.
After the brief decline in the fourth quarter, the unit price has been recovering, forming a bullish “Golden Cross” – a positive technical pattern that occurs when the 50-day moving average crosses above the 200-day moving average.
In terms of key resistance and support levels, there is initial overhead resistance around $132, close to its record closing high of $131.98 reached in Sept. 2018. After that, there is a ceiling of resistance around $140. Looking at the downside, there is strong technical support around $120, close to its 50-day moving average (at $120.37) and its 200-day moving average (at $119.66).
Liquidity can be low with the three-month historical daily average trading volume at just 53,000 units.
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.