Heroux-Devtek Q4 Sales Decline 7%; Shares Jump 8%

Shares of Heroux-Devtek (HRX) gained 8% on Thursday morning after the company posted its Q4 2021 and FY 2021 financial results. The Canadian company, based in Longueuil, Quebec, specializes in manufacturing and repairing various industrial, energy, and aerospace components.

Fourth-quarter consolidated sales decreased 7.1% to C$155 million, down from C$166.8 million in the prior-year quarter. Defense sales rose 13% to C$107.3 million in contrast to the civil sector, which saw sales decrease 33.7% to C$47.7 million.

Meanwhile, the company’s operating income was C$12.2 million in Q4 2021, compared to a loss of C$64.4 million in Q4 2020. Adjusted EBITDA amounted to C$25 million (16.1% of sales), compared with C$28.6 million (17.2% of sales) last year.

Earnings per share went from a loss of C$1.98 last year to EPS of C$0.24 for Q4 2021. On an adjusted basis, earnings declined from C$0.38 to C$0.28 per share.

Heroux-Devtek’s President and CEO Martin Brassard said, “Even if this past fiscal year has brought along challenges of unprecedented magnitude for the global aerospace industry, our early and decisive actions, resilience and focus on execution have enabled us so far to successfully weather the storm. More importantly, we have done so while strengthening our balance sheet, generating record cash flows, and gaining new operational efficiencies across our sites – lowering fixed costs, reallocating resources as well as optimizing inventories and working capital.”

The landing gear manufacturer also announced it would launch a normal course issuer bid to optimize its capital allocation. (See Heroux-Devtek stock analysis on TipRanks)

Last month, TD Securities analyst Tim James downgraded HRX to Hold from Buy with a C$19.00 price target, for 10.3% upside potential.

James decided to downgrade HRX based on the stock’s valuation following its recent surge. He feels that the value of Heroux-Devtek’s primary attributes, including military sector exposure and cost reduction initiatives, are already factored in the stock price.

Overall, consensus on the Street is that HRX is a Moderate Buy based on 1 Buy and 1 Hold. The average analyst price target of C$20.00 implies 16% upside potential to current levels. Shares have gained more than 85% over the past year.

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