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Aerospace and defense company Cadre (NYSE:CDRE) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 19.2% year on year to $144.3 million. The company's full-year revenue guidance of $576.5 million at the midpoint also came in 1.2% above analysts' estimates. It made a GAAP profit of $0.31 per share, improving from its profit of $0.29 per share in the same quarter last year.
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Cadre (CDRE) Q2 CY2024 Highlights:
- Revenue: $144.3 million vs analyst estimates of $142.1 million (1.6% beat)
- EPS: $0.31 vs analyst estimates of $0.27 (15.4% beat)
- EBITDA guidance for the full year is $106 million at the midpoint, below analyst estimates of $106.6 million
- Gross Margin (GAAP): 40.6%, down from 41.9% in the same quarter last year
- EBITDA Margin: 19.6%, in line with the same quarter last year
- Free Cash Flow of $9.12 million, up from $794,000 in the previous quarter
- Market Capitalization: $1.39 billion
Originally known as Safariland, Cadre (NYSE:CDRE) specializes in manufacturing and distributing safety and survivability equipment for first responders.
Law Enforcement SuppliersMany law enforcement suppliers companies require licensing and clearance to manufacture products such as firearms. These companies can enjoy long-term contracts with law enforcement and corrections bodies, leading to more predictable revenue. It is still unclear how the recent focus on excessive force and police accountability will impact longer-term demand. On the one hand, lethal force products could become less popular. On the other hand, products such as body cams that aid in the transparency of policing could become standard. Generally, the sector’s fate will also ebb and flow with state or local budgets, and there is high reputational risk, as one mishap or bad headline can change a company’s fortunes.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Over the last four years, Cadre grew its sales at a solid 10.2% compounded annual growth rate. This shows it was successful in expanding, a good starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a stretched historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Cadre's annualized revenue growth of 11.9% over the last two years is above its four-year trend, suggesting its demand was strong and recently accelerated.
We can better understand the company's revenue dynamics by analyzing its most important segment, Products. Over the last two years, Cadre's Products revenue (body armor, corrections tools, sensors) averaged 14% year-on-year growth.
This quarter, Cadre reported robust year-on-year revenue growth of 19.2%, and its $144.3 million of revenue exceeded Wall Street's estimates by 1.6%. Looking ahead, Wall Street expects sales to grow 10.4% over the next 12 months, a deceleration from this quarter.
Operating MarginCadre has managed its expenses well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 10.3%.
Looking at the trend in its profitability, Cadre's annual operating margin decreased by 4.7 percentage points over the last five years. Even though its margin is still high, shareholders will want to see Cadre become more profitable in the future.
This quarter, Cadre generated an operating profit margin of 13.8%, in line with the same quarter last year. This indicates the company's overall cost structure has been relatively stable.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Sadly for Cadre, its EPS declined by 4.5% annually over the last four years while its revenue grew by 10.2%. This tells us the company became less profitable on a per-share basis as it expanded.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Cadre, its two-year annual EPS growth of 151% was higher than its four-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
In Q2, Cadre reported EPS at $0.31, up from $0.29 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Cadre to grow its earnings. Analysts are projecting its EPS of $1.03 in the last year to climb by 22.6% to $1.26.
Key Takeaways from Cadre's Q2 Results We were impressed by how significantly Cadre blew past analysts' revenue expectations this quarter, driven by outperformance in its Products segment. We were also excited its EPS beat Wall Street's estimates. Zooming out, we think this was a good quarter with some key areas of upside. The stock traded up 2.2% to $34.60 immediately after reporting.
