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Marine infrastructure company Orion (NYSE:ORN) missed analysts' expectations in Q2 CY2024, with revenue up 5.3% year on year to $192.2 million. It made a GAAP loss of $0.20 per share, down from its loss of $0.01 per share in the same quarter last year.
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Orion (ORN) Q2 CY2024 Highlights:
- Revenue: $192.2 million vs analyst estimates of $199 million (3.4% miss)
- Adjusted EBITDA: $5.5 million vs analyst estimates of $9.6 million (large miss)
- EPS: -$0.20 vs analyst estimates of -$0.02 (-$0.18 miss)
- Gross Margin (GAAP): 9.5%, up from 7.6% in the same quarter last year
- Free Cash Flow was -$19.97 million compared to -$24.68 million in the previous quarter
- Market Capitalization: $390 million
Established in 1994, Orion (NYSE:ORN) provides construction services for marine infrastructure and industrial projects.
Construction and Maintenance ServicesConstruction and maintenance services companies not only boast technical know-how in specialized areas but also may hold special licenses and permits. Those who work in more regulated areas can enjoy more predictable revenue streams - for example, fire escapes need to be inspected every five years–. More recently, services to address energy efficiency and labor availability are also creating incremental demand. But like the broader industrials sector, construction and maintenance services companies are at the whim of economic cycles as external factors like interest rates can greatly impact the new construction that drives incremental demand for these companies’ offerings.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Orion grew its sales at a mediocre 6.3% compounded annual growth rate. This shows it couldn't expand in any major way and is a tough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Orion's recent history shows its demand slowed as its annualized revenue growth of 3.7% over the last two years is below its five-year trend.
This quarter, Orion's revenue grew 5.3% year on year to $192.2 million, missing Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 25.7% over the next 12 months, an acceleration from this quarter.
Operating Margin Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Orion was roughly breakeven when averaging the last five years of quarterly operating profits, one of the worst results in the industrials sector. This isn't too surprising given its low gross margin as a starting point.
Analyzing the trend in its profitability, Orion's annual operating margin decreased by 2.4 percentage points over the last five years. The company's performance was poor no matter how you look at it. It shows operating expenses were rising and it couldn't pass those costs onto its customers.
In Q2, Orion generated an operating profit margin of negative 1.4%, up 1 percentage points year on year. Since its gross margin expanded more than its operating margin, we can infer that leverage on its cost of sales was the primary driver behind the recently higher efficiency.
EPS Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Although Orion's full-year earnings are still negative, it reduced its losses and improved its EPS by 32.2% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.
In Q2, Orion reported EPS at negative $0.20, down from negative $0.01 in the same quarter last year. This print missed analysts' estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street is optimistic. Analysts are projecting Orion's EPS of negative $0.54 in the last year to reach break even.
Key Takeaways from Orion's Q2 Results We struggled to find many strong positives in these results. Its revenue, adjusted EBITDA, and EPS all unfortunately fell short of Wall Street's estimates. Overall, this quarter could have been better. The stock traded down 5.1% to $10.49 immediately after reporting.
