Cubic Drops 4.5% As 4Q Sales Miss The Street

Shares of Cubic Corp. are down 4.5% in Thursday’s pre-market trading after the transportation and defense services provider reported weaker-than-expected 4Q sales. Its 4Q revenue increased 1% year-over-year to $475.4 million, but fell short of analysts’ estimates of $479.6 million. During the same period, organic revenues declined 4% due to delay in orders and lower transit ridership amid the coronavirus pandemic.

Meanwhile, Cubic’s (CUB) 3Q earnings of $2.82 per share topped the Street’s estimates of $2.04 and jumped 52% year-over-year, driven by higher adjusted EBITDA and lower tax expenses. The company’s adjusted EBITDA increased 36% to $104.2 million, while adjusted EBITDA margin expanded 560 basis points to 21.9%.

Cubic’s CEO Bradley H. Feldmann said “We ended the fiscal year on a strong note, delivering record fourth quarter Sales and Adjusted EBITDA and strong Adjusted Free Cash Flow.” He added that “We are excited about the future as we embark on our recently announced NextCUBIC strategy, which we expect will drive strong organic sales growth and increase Adjusted EBITDA margins and return on invested capital to the mid-teens by fiscal 2025.”

As for fiscal 2021, the company predicts revenues in the range of $1.55-1.6 billion, which is higher than the Street consensus of $1.54 billion. Cubic anticipates fiscal 2021 EPS in the range of $3-$3.60, compared with consensus estimates of $3.24. Adjusted EBITDA is expected in the range of $170-$190 million for fiscal 2021. (See CUB stock analysis on TipRanks).

On Nov. 16, J.P. Morgan analyst Mark Strouse raised the stock’s price target to $68 (4.6% upside potential) from $61 and maintained a Buy rating, as the analyst expects visibility into existing contracts to remain strong.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 5 Buys and 2 Holds. The average price target stands at $61.71 and implies downside potential of about 5.1% to current levels. Shares were up by 2.3% year-to-date.