Douglas Dynamics (NYSE:PLOW) Inc. reported mixed results for the third quarter of 2023 during its earnings conference call, with the Solutions segment showing significant improvement while the Attachments segment faced challenges due to low preseason orders following a record-low snow season. The company lowered its guidance for the year due to external headwinds such as low snowfall and an uncertain chassis supply situation. Despite these challenges, the company remains focused on achieving its $3 earnings per share (EPS) target and sees long-term growth opportunities in the Solutions business.
Key takeaways from the call include:
- Sales in the Solutions segment increased double digits, and adjusted EBITDA margin jumped to 7.3%.
- The Attachments segment faced a difficult comparison to the previous year due to lower volumes caused by low preseason order demand.
- The company lowered its guidance for the year due to the effects of low snowfall and the uncertain chassis supply situation.
- Despite these challenges, the company remains focused on achieving its $3 EPS target and sees long-term growth opportunities in the Solutions business.
- SG&A expenses decreased by 6.2% to $18 million, primarily due to a decrease in incentive and stock-based compensation.
- Net income for the quarter was $5.8 million, with diluted earnings per share of $0.24, both lower than the same period last year.
Despite the challenges, Douglas Dynamics highlighted improvements in component supply and labor availability but expressed concerns about the impact of the UAW strike and the El Niño weather pattern. The company's long-term goal of reaching $3 of adjusted earnings per share in 2025 may be delayed due to ongoing headwinds. However, the company remains confident in its internal growth drivers and expects to provide 2024 guidance in February. The dividend remains a top priority, and the company plans to keep it sustainable and increase it as possible.
The company's CFO, Sarah Lauber, discussed their growth drivers and plans for the future. They mentioned that internal growth drivers have been a focus and are expected to contribute to higher margins and attachment margins in the long term. They also stated that the company's dividend policy remains unchanged, with a focus on sustainability and potential increases. In terms of their Solutions business, they acknowledged the impact of a recent strike on chassis supply but did not have specific details on the extent of the impact. They expect some impact in early 2024.
Douglas Dynamics' CEO, Robert McCormick (NYSE:MKC), expressed confidence in the company's ability to manage uncertainty and highlighted positive long-term demand trends. He added that the core business is very profitable, but growth opportunities in the non-truck space may not reach the same level of profitability.
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