On Thursday, Oppenheimer reinstated coverage on Target Hospitality (NASDAQ:TH) stock with a Perform rating, following the company's recent financial updates and developments.
The rating comes after the September 25, 2024, disclosure that Target (NYSE:TGT)'s largest shareholder decided not to proceed with its $10.80 per share acquisition offer for the remaining shares of Target Hospitality it does not own.
Target Hospitality reported third-quarter 2024 revenues of $95.2 million, a 35% decrease year-over-year, yet surpassing both Oppenheimer's and the consensus estimates of $89.0 million and $87.9 million, respectively.
Adjusted EBITDA for the same period stood at $49.7 million, down 48% from the previous year, but again topping estimates of $41.4 million and $41.7 million.
Despite the declines, Target Hospitality confirmed its full-year 2024 revenue and adjusted EBITDA guidance, projecting revenues between $375 million and $385 million and adjusted EBITDA in the range of $184 million to $190 million. These figures represent a year-over-year decrease of 33% to 32% for revenues and 47% to 45% for adjusted EBITDA, respectively.
The company also mentioned its Pecos Children Center (PCC) government contract, indicating an expectation for a routine renewal in the near future. Currently, Target Hospitality's shares are trading at a multiple of 5.5 times Oppenheimer's unchanged 2025 estimated adjusted EBITDA, in comparison to its historical 3-year average of 4.8 times forward twelve months (FTM) EBITDA.
In other recent news, Target Hospitality reported a steady Q3 2024 performance, with total revenues of approximately $95 million and an adjusted EBITDA of around $50 million.
Despite a decrease in non-recurring government sector revenue and the termination of a contract, the company maintained a strong liquidity position, with $178 million in cash and $353 million in total liquidity. It also returned approximately $33 million to shareholders through stock repurchases. The firm's management anticipates consistent performance and moderate seasonality in Q4.
Analysts expect total revenue for 2024 to be in the range of $375 million to $385 million, with adjusted EBITDA of $184 million to $190 million. Capital expenditures are projected to range from $25 million to $30 million for 2024.
Notably, Target Hospitality is actively exploring growth opportunities, particularly in the government sector. These are recent developments that investors should keep an eye on.
InvestingPro Insights
Target Hospitality's financial landscape, as reflected in recent InvestingPro data, provides additional context to Oppenheimer's analysis. The company's market cap stands at $969.62 million, with a P/E ratio of 11.25, suggesting a relatively modest valuation compared to earnings. This aligns with the company's performance metrics, including a revenue of $428.8 million over the last twelve months as of Q3 2024, despite a significant revenue decline of 27.3% during the same period.
InvestingPro Tips highlight Target Hospitality's impressive gross profit margins, which is evident in the reported 61.2% gross profit margin for the last twelve months. This strength in profitability is particularly noteworthy given the challenging revenue environment described in the article.
The company's stock has shown significant volatility, with a strong 27.94% return over the last month, contrasting with a 13.35% decline over the past year. This recent uptick could be related to the company's Q3 performance exceeding analyst expectations, as mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Target Hospitality, providing a deeper dive into the company's financial health and market position.
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