On Thursday, Benchmark raised the stock price target for Bristow Group (NYSE:VTOL) to $50 from the previous $45, while maintaining a Buy rating on the stock. The adjustment reflects an application of an 8.0x multiple to the anticipated FY25 EV/EBITDA. Bristow's updated FY24 and FY25 guidance, reflecting increased visibility in the long-cycle offshore energy services (OES) market, has prompted the firm to revise its financial projections upward.
In its second quarter of fiscal year 2024, Bristow Group reported EBITDA of $71 million. After accounting for one-time factors totaling approximately $8.6 million, including seasonal personnel costs, accounting changes, and tax and insurance adjustments, the adjusted EBITDA of $62.7 million still significantly outperformed the street's expectation of $50.2 million. This beat is attributed to an uptick in offshore activity and tight support from helicopter manufacturers and aftermarket services, which has led to increased utilization and higher pricing for Bristow's services.
The demand for helicopter lift services has reached a peak, with many OES companies having to share resources. This high demand against the backdrop of a constrained supply has led to a substantial increase in pricing, with new contracts seeing prices roll over at a rate 25% higher than before.
Furthermore, Bristow's substantial search and rescue (SAR) contracts in the United Kingdom, valued at $1.6 billion, and in Ireland, approximately $700 million, are expected to ramp up in FY25. This is anticipated to add a layer of durability to the company's earnings. The analyst also noted that Bristow's large $300 million investment in helicopters to fulfill SAR contracts is concluding this year, which is likely to mark the beginning of an attractive free cash flow (FCF) profile cycle starting in FY25.
In other recent news, Bristow Group Inc. has reported strong financial results for Q1 of 2024, exceeding expectations due to new contracts in Norway and Brazil. The company has affirmed its full-year guidance for 2024 and anticipates a compound annual growth rate in adjusted EBITDA of over 22% from 2022 to 2026. Bristow Group also projects significant growth for 2025 and 2026, with a contractual backlog of $4.2 billion.
The company sees a multiyear growth cycle in the Offshore Energy Services industry and strong demand in Government Services. Bristow Group has also announced orders for new helicopters, which are expected to drive EBITDA growth.
On the downside, the company acknowledged risks in contract renewals, with customers potentially opting for lower-cost operators. However, Bristow remains confident in positive activity levels for the next 2-3 years and plans to incorporate AAM technology into its fleet by the end of 2025 or early 2026. These are among the recent developments for the company.
InvestingPro Insights
Bristow Group's financial health and market performance have shown notable trends that investors may find compelling. According to InvestingPro data, the company boasts a market capitalization of approximately $1.07 billion and a P/E ratio of 31.05, indicating that the stock is trading at a high earnings multiple. However, this valuation comes with positive expectations, as net income is projected to grow this year. Additionally, Bristow's liquid assets surpass its short-term obligations, suggesting a solid liquidity position.
Investors have recognized the company's potential, reflected in a strong return over the last three months of 17.02%. This uptrend is further evidenced by a significant six-month price total return of 41.4%. These metrics underscore the market's response to Bristow's operational performance and future prospects.
For those seeking a deeper dive into Bristow Group's financials and future outlook, InvestingPro offers additional insights. There are currently 9 InvestingPro Tips available, which provide a more granular analysis of the company's financial health and market performance. For instance, analysts predict the company will be profitable this year, and it has been profitable over the last twelve months. These tips could offer valuable guidance for investors considering Bristow Group as part of their portfolio.
For more detailed analysis and to explore the full range of InvestingPro Tips, visit: https://www.investing.com/pro/VTOL.
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