It has been about a month since the last earnings report for Macquarie (MIC - Free Report) . Shares have added about 1.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Macquarie due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Second-Quarter 2018 Results
Macquarie’ssecond-quarter 2018 adjusted earnings came in at 45 cents per share, beating the Zacks Consensus Estimate of 41 cents by 9.8%. Also, the figure came in higher than 32 cents per share reported in the prior year. Lower taxes, reduction in management fees, as well as unrealized gains on derivative instruments drove the bottom line, along with modest revenue growth.
The company generated revenues of $478.1 million, which rose 8.9% year over year and also beat the Zacks Consensus Estimate of $441.1 million. The top line was driven by solid operational growth in the Atlantic Aviation segment. Service revenues grew 9% year over year and product revenues rose 8.7%.
Revenues from the International-Matex Tank Terminals segment came in at $129.4 million, down 5.7% year over year. It represented 27.1% of the company’s second-quarter revenues. The segment’s EBITDA declined 10% year over year to $74 million, due to a fall in capacity-utilization levels.
The Atlantic Aviation segment generated revenues of $232.9 million, up 18.3% year over year and accounting for 48.6% of the company’s overall revenues. The segment’s EBITDA rose 5.1% over the comparable period last year to $60.3 million, driven by higher general aviation flight activity and contributions from acquired fixed base operations.
The Contracted Power segment’s revenues came in at $41.4 million, up 3.1% year over year. It represented 8.6% of Q2 revenues. The segment’s EBITDA rose 20.1% from the prior-year quarter’s tally. Improved wind resources and higher tariff-based revenues from the thermal power generation facility drove the performance.
Revenues in the MIC Hawaii segment were up 14.6% year over year to $75.6 million. It represented 15.7% of overall quarterly revenues. The segment’s EBITDA plunged 21.4%, from prior-year quarter and was hurt by elevated expenses.
In the reported quarter, Macquarie’s cost of services and cost of product sales increased 22.2% and 17.2% year over year, respectively. Selling and administrative expenses also flared up 7.2% from the year-ago tally. Overall, operating expenses rose 12.2% to about $406 million.
As announced earlier, Macquarie was undertaking initiatives for the repurposing and repositioning of certain IMTT assets, to better align the unit according to shifts in global demand and trade flows. Particularly, the company expects to repurpose up to 3 million barrels of storage capacity at IMTT away from primarily heavy and residual oils to gasoline and distillates, chemicals and vegetable and/or tropical oils.
In July, the company entered into an agreement to sell 100% of Bayonne Energy Center to NHIP II Bayonne Holdings LLC. The transaction is expected to be concluded in fourth-quarter 2018. This apart, in April, IMTT concluded the sale of its subsidiary OMI Environmental Solutions, Inc.
Liquidity & Cash Flow
Exiting the second quarter, the company had cash and cash equivalents of $54 million and long-term debt of about $3.3 billion. The company’s adjusted free cash flow for the quarter fell 10.3% year over year to $126.6 million, hurt by rise in interest expenses, taxes and maintenance capital expenditures.
Macquarie provided guidance for 2018 EBITDA and currently expects the same in the range of $670-705 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
At this time, Macquarie has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Macquarie has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.