This death care company handily beat estimates for its last quarter, and the stock is gathering momentum.
Matthews International (MATW)
From The Periscope Report
Matthews International (MATW) is the largest maker of bronze and granite memorials that are placed on gravesites. It is also the largest maker of mausoleums in the Unites States. MATW has a 22% market share for memorials and a 30% market share for mausoleums. No competitor has more than 1%, which makes it a true market dominator. MATW recently bought the Aurora Casket Company, so now it is moving vertically in the death care industry.
Management had given earnings guidance for fiscal 2016 of $3.25 per share. Actual earnings came in at $3.38 per share, as it trounced 4Q estimates. For the 4Q ended September 2016, revenues increased 2% YoY to $377.0 million, after increasing 5% YoY in the prior quarter. Revenues were down 1% sequentially.
Net Income increased 41% YoY to $23.9 million, after increasing 4% YoY in the prior quarter. On a Non-GAAP basis, net earnings increased to $1.08 per share, up from $0.93 per share a year ago, and up from $0.97 per share in the prior quarter. MATW clobbered the mean estimate for $0.98 per share, the third quarter in a row it has beat estimates. MATW beat estimates because the acquisition of Aurora added more sales and cost synergies than expected.
MATW increased its quarterly dividend by 13% to $0.17 per share in the 4Q.
Sales for the fiscal year ended September 2016 were $1.48 billion, up from $1.43 billion a year ago, representing an increase of $54.4 million, or 4%. On a Non-GAAP basis, earnings for fiscal 2016 were $3.38 per share, up from $3.03 a year ago, an increase of 12%.
Looking at fiscal 2017, management remains cautious giving uncertainty around expected death rates, sluggish North American and European brand markets, currency fluctuations, and commodity headwinds. Nonetheless, assuming some stability in the markets in which MATW operates, management expects earnings to grow in the high single-digit range in fiscal 2017.
This was a great quarter for MATW despite lower death rates. The acquisitions of Schawk (acquired in 2014) and Aurora should triple the company’s EBITDA within two years, which is not being valued into the current stock price. Keep adding to your position.
Tom Byrne, The Periscope Report, 4025 Sunset Ridge Drive, Canyon Ferry Crossing, Helena, MT 59602, 406-465-4663, December 2016