On Friday, B.Riley Financial raised the price target for RF Industries Ltd. (NASDAQ:RFIL) shares to $4.25 from the previous target of $4.00, while maintaining a Buy rating on the stock.
The firm's positive stance comes after RF Industries reported second-quarter fiscal year 2024 sales of $16.1 million, a 20% increase from the previous quarter, which met the company's pre-announced figures on May 21, 2024.
RF Industries achieved a gross margin of 29.9%, significantly surpassing B.Riley's estimate of 25.3%. This increase was attributed to a favorable production mix. Consequently, the company's EBITDA and pro forma EPS of $0.6 million and $0.01, respectively, exceeded the analyst's expectations of a $(0.2) million EBITDA and a $(0.03) EPS.
The company reported bookings of $17.9 million and concluded the quarter with a backlog of $18.0 million, which has since increased to $20.0 million as of June 13, 2024, up from $16.2 million at the end of the previous quarter.
RF Industries CEO Robert Dawson noted on the conference call that there is a growing demand for the company's higher-value products, including Direct-Air Cooling (DAC) solutions and integrated small-cell solutions.
RF Industries has also been focusing on operational efficiency improvements and expanding its product offerings through organic growth and mergers and acquisitions. These strategies have positioned the company to take advantage of the increasing activities in the telecom industry, especially after a tough fiscal year 2023 that saw negative impacts from carrier capital expenditure environments.
In May 2024, RF Industries secured several large orders totaling approximately $4 million across various product areas, including a significant $2 million order for small-cell solutions from a key customer within the Tier 1 wireless carrier ecosystem.
B.Riley has adjusted its fiscal years 2024 and 2025 profitability estimates slightly lower in terms of revenue, but expects the favorable gross margin dynamics to continue, supporting improved profitability in the second half of fiscal year 2024 and into the next year.
The firm anticipates that securing more high-margin projects could significantly influence RF Industries' financial performance, given the company's operating leverage and more efficient cost structure after the consolidation of manufacturing and distribution facilities.
In other recent news, RF Industries has reported promising financial results in its second-quarter fiscal 2024 earnings call. The company showcased a 19.7% increase in net sales to $16.1 million and a gross profit margin improvement by 540 basis points to 29.9%.
Despite a consolidated net loss of $4.3 million, largely due to a non-cash tax provision, the company reduced its operating loss to $415,000 and returned to positive adjusted EBITDA.
The addition of Mary Beth Smith as Vice President of North American Distribution Sales is a significant development in the company's executive team. This move coincides with a strong liquidity position, with $1.4 million in cash and a $15 million line of credit, providing a solid foundation for future growth.
RF Industries anticipates sequential revenue growth and gross margins above 30% in the second half of the fiscal year, along with further reductions in operating expenses. These expectations are bolstered by a backlog increase from $18 million to $20 million, signaling potential for continued growth.
The company's strategic shifts towards higher quality solutions and favorable market trends, such as 5G infrastructure, data center expansion, and defense initiatives, are expected to drive this growth.
InvestingPro Insights
With RF Industries Ltd. (NASDAQ:RFIL) demonstrating a strong performance in the second quarter, the insights from InvestingPro further enrich the analysis of the company's financial health and future prospects. The current market capitalization stands at $33.59M, reflecting the market's valuation of the business. Despite the challenges faced in the past fiscal year, RF Industries has a Price / Book ratio of 0.87 as of the last twelve months leading up to Q1 2024, suggesting that the stock may be undervalued relative to the company's assets.
An important aspect to consider from InvestingPro Tips is the company's strong free cash flow yield, which indicates its ability to generate cash and potentially fund growth initiatives or return value to shareholders. Although RF Industries does not pay a dividend, the company's liquid assets surpass short-term obligations, providing financial flexibility. Moreover, while analysts predict a sales decline in the current year, they also anticipate the company will become profitable within the year, which could be a pivotal turnaround for RF Industries.
For investors seeking comprehensive analysis and additional insights, InvestingPro offers more tips to guide investment decisions. Currently, there are 6 additional InvestingPro Tips available for RF Industries, which can be accessed through the dedicated page. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing the value of this investment research tool.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.