On Friday, BMO Capital Markets adjusted its outlook on FirstService Corp (NASDAQ:FSV) shares, increasing the price target to $196 from $193 while maintaining an Outperform rating on the stock. The revision follows FirstService's recent expansion in the commercial roofing sector.
The company's foray into commercial roofing services was marked by its acquisition of RCA in December 2023. This move was augmented by the subsequent purchases of Crowther Roofing and Hamilton Roofing, which collectively contribute over $150 million in annual revenues.
These acquisitions are significant as they establish FirstService's substantial new presence in Florida, a key roofing market in North America.
According to BMO Capital, the acquisitions are expected to be accretive to FirstService's earnings before interest, taxes, depreciation, and amortization (EBITDA) by approximately 3% on a pro forma basis. This financial enhancement is reflected in the updated EBITDA estimates, which have prompted the price target adjustment.
The strategic acquisitions are in line with FirstService's long-term plan to expand the geographic reach of RCA. This move is seen as a positive development for the company as it taps into one of the largest roofing markets in the region, potentially bolstering its market position and revenue streams.
BMO Capital's continued Outperform rating indicates a positive outlook on FirstService's stock, suggesting confidence in the company's strategic direction and its potential for growth following these recent expansions.
In other recent news, a significant 14% revenue increase was reported by the company, reaching $1.16 billion, primarily due to strategic acquisitions. Adjusted EBITDA also saw a 2% rise to $83.4 million.
Despite a decline in some sectors such as restoration due to mild weather, the company remains optimistic about growth prospects, including residential services and the recent acquisition of Rizzetta & Company.
The company's revenues from First Service residential grew by 11% through organic growth and new contracts. The acquisition of Roofing Corp of America contributed to a 16% revenue increase in First Service brands. However, organic revenues for First Service brands were down by 6%.
The company completed the acquisition of All Restoration Solutions to bolster the Georgia market, and Century Fire Protection reported strong low-double-digit organic growth.
The company is expecting high-single-digit growth in First Service residential and modest growth in home improvement for the upcoming periods. However, net debt increased to just under $1.1 billion with a leverage ratio of 2.3 times.
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