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February 23, 2023

Earnings Updates: FTI, PWSC, OPCH

TechnipFMC (FTI) reported early this morning that Q4 revenue came in at $1.69 billion (+11.2%), about $20 million higher than expected. Adjusted EPS of $0.05 was on the light side (missed by $0.09). Management updated 2023 guidance, calling for revenue in a range of $7.2 - $7.75 billion, versus consensus of $7.42 billion. Backlog is up 22% to $9.4 billion, and free cash flow in the quarter was $503 million. There is a lot more in the earnings release, including details on both subsea and surface division results, as well as stock buybacks. But, big picture, the message is FTI is doing what we hired it to do, cash flow is good, we may see a dividend at some point and that’s why shares are up today. Keeping at buy. BUY

We’re going to step aside from PowerSchool (PWSC) this morning. The company reported Q4 results that were slightly below expectations, largely due to a Puerto Rico deal that has yet to come through. While the deal is most likely just delayed, Q1 guidance is a little light (probably also due to the deal) and full-year guidance is slightly lower than I expected. Altogether, this wasn’t a horrible quarter but it also wasn’t the better-than-expected result that I’m looking for out of a relatively conservative name that I wanted to tick higher week after week. Should the market weaken, I could see PWSC sliding, and I’d rather just step aside and look for opportunities elsewhere. We’ll exit our half stake just a little below where we got in. SELL

Option Care Health (OPCH) reported this morning that Q4 results were solid. Revenue of $1.02 billion grew by 10% and was in line with expectations while GAAP EPS of $0.26 beat by $0.04. Part of that EPS beat is likely because Option Care sold off some respiratory therapy assets in December and should book a $10.3 million pre-tax gain on the $18.3 million sale. Management announced a $250 million share repurchase program, timing TBD. That’s a positive. Guidance for 2023 suggests revenue of $4.15 - $4.38 billion versus consensus of $4.28 billion (+8%). Overall, it was a decent quarter, and the buyback is welcome news. Still, OPCH hasn’t performed up to expectations and we entered the stock as a trade opportunity that went bust soon after we got in. With shares up nicely today we’ll take the exit opportunity and sell at a slight discount to our entry price (roughly a 7% loss) and look for stocks with more upside. SELL

Tyler Laundon is chief analyst of the limited-subscription advisory, Cabot Small-Cap Confidential and grand slam advisory Cabot Early Opportunities. He has spent his entire career managing, consulting and analyzing start-up and small-cap companies. His hands-on experience has taught Tyler that the development of a superior business model is the biggest factor in determining a company’s long-term success. Accordingly, his research focuses on assessing the viability of management’s growth strategies, trends in addressable markets and achievement of major developmental milestones.