Heroux-Devtek Q3 Sales and Profit Fall

Heroux-Devtek (TSE: HRX) third-quarter 2022 results were hit by the progression of Omicron, as the variant caused disruptions in the supply chain and production systems.

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The Quebec-based company specializes in the manufacture and repair of various industrial, energy, and aerospace components.

Sales & Earnings

Consolidated sales decreased 12.7% to C$131.1 million in the third quarter, down from C$150.3 million in the prior-year quarter. Defence sales were down 3.9% to C$94.6 million, while civil sales decreased 22.4% to C$36.5 million.

The company earned an operating income of C$10.5 million in Q3 2022, compared to C$13.4 million in Q3 2021. Adjusted EBITDA amounted to C$19.7 million (15% of sales), compared with C$23.7 million (15.8% of sales) last year.

Net income was C$6.5 million (C$0.18) in Q3 2022, compared with C$8.5 million (C$0.24) in Q3 2021.

On an adjusted basis, earnings decreased from C$0.26 to C$0.18 per share.

Management Commentary

Heroux-Devtek president and CEO Martin Brassard said, “In the final weeks of the quarter, we faced supply chain and production system disruptions brought on by the generally challenging environment, mostly due to the Omicron variant of COVID-19, resulting in lower throughput than anticipated, particularly for aftermarket products. While we expect these factors to continue to affect the fourth quarter as well, we are confident in our ability to recover the lower throughput in the quarters ahead.”

Wall Street’s Take

Three months ago, Raymond James analyst Bryan Fast kept a Buy rating on HRX with a C$20.50 price target. This implies 14.5% upside potential.

Overall, HRX scores a Strong Buy consensus rating among analysts based on three Buys. The average Heroux-Devtek price target of C$23.50 implies 31.3% upside potential to current levels.

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