Oppenheimer has maintained its positive stance on WillScot (NASDAQ:WSC) Mobile Mini (NASDAQ:MINI_old) Holdings Corp. (NASDAQ: WSC), reiterating an Outperform rating and a $46.00 price target.
The firm expects the company to continue growing its adjusted EBITDA in the third quarter of 2024, driven by rental rate increases that should compensate for a year-over-year decline in volume.
The analyst noted that while cyclical pressures are moderating the company's overall growth trajectory, the long-term growth potential remains unaffected. WillScot is well-positioned to capitalize on opportunities arising from the manufacturing sector's reshoring activities and the allocation of infrastructure bill funds.
Additionally, the company's rental rate growth is supported by the Value-Added Products and Services (VAPS), which include incremental rental items within modular and storage units.
Despite the current economic headwinds, the analyst believes that declining interest rates could potentially boost construction activity as early as 2025. WillScot's stock is currently trading at 9.3 times its enterprise value to adjusted EBITDA (EV/EBITDA) based on Oppenheimer's 2025 estimates. This valuation is notably lower than the company's four-year historical average of 11.4 times its estimated forward twelve months (FTM) adjusted EBITDA.
In other recent news, WillScot Mobile Mini Holdings Corp. saw a series of analyst ratings adjustments following the termination of its planned merger with McGrath due to regulatory challenges.
Baird maintained an Outperform rating on the company, highlighting its strong unit-level returns and high free cash flow yield. In contrast, Barclays (LON:BARC) downgraded the stock from Overweight to Equalweight, citing the company's failed deal and its implications on future performance. DA Davidson reiterated a Buy rating, expressing confidence in the company's potential to navigate through existing market challenges and capitalize on future prospects.
These developments came alongside the announcement of WillScot's new $1 billion share buyback program, indicating the company's confidence in its financial position and commitment to delivering value to its shareholders. The company also reported a solid Q2 performance, with revenues rising by 4% year-over-year due to robust demand in various sectors. Despite a decrease in non-residential square-foot starts affecting its storage and smaller modular product lines, WillScot generated $121 million in free cash flow during the quarter.
WillScot has revised its full-year outlook, anticipating lower revenues in the second half of the year but expects a stronger sequential pickup in Q4 and record growth in 2025. The company is undertaking strategic initiatives that include a 15% reduction in indirect headcount, brand consolidation under WillScot, and investments in climate-controlled storage and Clearspan categories, expected to drive growth into 2025.
InvestingPro Insights
WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) continues to demonstrate financial resilience and strategic growth potential, as highlighted by recent data from InvestingPro. With a market capitalization of $7.72 billion and an impressive gross profit margin of 55.08% over the last twelve months as of Q2 2024, the company's financial health appears robust. This is further supported by a solid operating income margin of 24.75% in the same period, indicating efficient management of its operations.
Investors may also find the company's share performance noteworthy, with a 1-month price total return of 5.29% and a 3-month price total return of 6.61%, despite a 6-month price total return showing a dip of -9.61%. These figures suggest a short-term positive trend in share price movement. Additionally, InvestingPro Tips highlight that management has been actively buying back shares and that analysts are predicting profitability for the current year, which could be a sign of confidence in the company's future performance. For those seeking more detailed analysis and insights, InvestingPro offers additional tips on WillScot Mobile Mini Holdings Corp., which can be found at https://www.investing.com/pro/WSC.
Given the company's trading at a high earnings multiple of 41.98 and a price/book multiple of 6.43, some investors might view the stock as richly valued. However, these metrics may also reflect the market's high expectations for WillScot's growth and profitability, aligning with Oppenheimer's positive outlook. With the fair value estimated by analysts at $45 and InvestingPro's fair value slightly lower at $44.74, the current price of $40.99 suggests potential upside for investors, considering the company's strategic positioning and financial metrics.
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