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Category: Stock Market and Lawson Products
Date: 25 October 2019 Stock Price: $47.10 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Lawson Products an industrial distributor and supplier of maintenance and repair supplies.
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About Lawson Products
Lawson Products is an industrial distributor of maintenance and repair supplies, committed to helping customers improve their operating performance. Under our Kent Automotive brand, we supply products and services to collision and mechanical repair shops as well as OEMs. Through The Bolt Supply House, customers in Western Canada have access to products at several retail branches.
Overview of Lawson Products 3rd quarter 2019 earnings report
Data below refers to quarterly data unless specified otherwise:
- Revenue: $94.779 million (up from $85.530 million for the same period of the previous year)
- Revenue increased by 10.8% over the last 12 months
- Product cost of goods sold: $39.635 million (up from $36.979 million for the same period of the previous year)
- Product cost of goods sold increased by 7.2% over the last 12 months
- Net income: 4.77 million (up from a loss of -$860 thousand for the same period of the previous year)
- Diluted earnings per share: $0.51 (up from -$0.09 for the same period of the previous year)
- PE ratio of Lawson Products: 22.4
- Diluted weighted-average shares outstanding: 8.956 million
- Cash and cash equivalents: $8.626 million
- Cash and cash equivalents per share: $0.96
- Cash and cash equivalents makes up 2% of Lawson Products market capital
- Cash and cash equivalents makes up 4.15% of Lawson Products total assets
- Accounts receivable: $45.162 million
- Accounts receivable makes up 21.7% of Lawson Products total assets
- Goodwill of Lawson Products: $20.582 million
- Goodwill per share: $2.29
- Goodwill makes up 9.9% of Lawson Products total assets
- Stockholders equity in Lawson Products: $112.981 million
- Stockholders equity per share in Lawson Products: $12.61
- So Lawson Products is trading at 3.73 times its stockholders equity per share which is within the expected range of between 2 and 4 most firms tend to trade at
Lawson Products' management commentary on their 3rd quarter 2019 results
CHICAGO--(BUSINESS WIRE)--Oct. 24, 2019-- Lawson Products, Inc. (NASDAQ: LAWS) (“Lawson” or the "Company"), a distributor of products and services to the MRO marketplace, today announced results for the third quarter ended September 30, 2019.
"I am pleased to report that our solid execution delivered another quarter of strong results. Revenues grew 7.1% which drove a 59% improvement in our adjusted operating income year-over-year and an 11% increase sequentially over the second quarter. Growth in The Bolt Supply House business along with targeted investments in the Company’s operations and sales force, combined with successfully leveraging our infrastructure on higher sales, had a positive impact on our results with adjusted EBITDA margin increasing to 10.9% of sales,” said Michael DeCata, president and chief executive officer. "Lawson is well-positioned to continue to deliver improved operating results through better sales rep productivity and customer fulfillment processes which will further leverage our cost structure. The recently announced $100 million plus credit facility, led by JPMorgan Chase, enhances our future financial flexibility,” concluded Mr. DeCata.
Highlights
"I am pleased to report that our solid execution delivered another quarter of strong results. Revenues grew 7.1% which drove a 59% improvement in our adjusted operating income year-over-year and an 11% increase sequentially over the second quarter. Growth in The Bolt Supply House business along with targeted investments in the Company’s operations and sales force, combined with successfully leveraging our infrastructure on higher sales, had a positive impact on our results with adjusted EBITDA margin increasing to 10.9% of sales,” said Michael DeCata, president and chief executive officer. "Lawson is well-positioned to continue to deliver improved operating results through better sales rep productivity and customer fulfillment processes which will further leverage our cost structure. The recently announced $100 million plus credit facility, led by JPMorgan Chase, enhances our future financial flexibility,” concluded Mr. DeCata.
Highlights
- Sales of $94.8 million increased 7.1% year-over-year. Average Daily Sales (ADS) increased 5.4% to $1.481 million in the third quarter of 2019 compared to $1.405 million in 2018 with one additional selling day in 2019.
- Reported operating income was $6.4 million compared to an operating loss of $2.3 million in the third quarter of 2018. Non-GAAP adjusted operating income excluding stock-based compensation, severance expense and acquisition costs increased 58.9% to $8.9 million from $5.6 million in the year ago quarter. (See reconciliation in Table 1) As a percent of sales adjusted EBITDA improved to 10.9% for the third quarter 2019 from 8.3% in the year ago quarter.
- Reported net income was $4.8 million for the quarter, or $0.51 per diluted share compared to a loss per diluted share of $0.09 in third quarter of 2018. On an adjusted basis, diluted earnings per share was $0.69. (See reconciliation in Table 2)
- Net cash generated from operations in the quarter of $10.3 million was used to reduce net borrowings by $8.3 million. The quarter ended in a net cash less debt positive position of $6.4 million.
- On October 14th, the Company announced a new five-year credit facility increasing its borrowing
Lawson Products (NASDAQ: LAWS) stock price history
The image below, obtained from Google, shows the stock price history of Lawson Products over the last 5 years. And it's been a very good time for Lawson Products stockholders. 5 years ago the stock was trading at around $24.10 a stock and its currently trading at $47.10 a stock. That's a very strong return of 95.4% provided to Lawson Products stockholders over the last 5 years. While the return of 95.4% is nothing to cry about the opportunity cost of holding Lawson Products stock instead of say Netflix that returned over 300% over a 5 year period becomes significant.
The stock of Lawson Products is trading at a very close to its 52 week high of $47.80 and is far away from its 52 week low of $28.10 which to us is a indication that the short term momentum and sentiment of Lawson Products stock is very positive at this point in time.
The stock of Lawson Products is trading at a very close to its 52 week high of $47.80 and is far away from its 52 week low of $28.10 which to us is a indication that the short term momentum and sentiment of Lawson Products stock is very positive at this point in time.
Recent coverage of Lawson Products
The extract below discusses Lawson Products new credit facility as obtained from TheStreet,com
Lawson Products, Inc. (NASDAQ: LAWS) ("Lawson" or the "Company"), a distributor of products and services to the MRO marketplace, has entered into a new credit agreement increasing its maximum borrowing capacity from $40 million to $100 million. The new agreement also includes an accordion feature, subject to certain criteria as well as obtaining additional commitments from its lenders that would provide meaningful additional borrowing capacity. The five-year agreement provides for increased capacity for future acquisitions, combines multiple existing credit facilities and lowers borrowing spreads and unused commitment fees. "We are extremely pleased to expand our bank group to include JPMorgan Chase and Bank of America and continue our long-term relationship with CIBC Bank USA, which allows us to access additional capital," said Ron Knutson, executive vice president and chief financial officer. "Our ability to significantly increase our access to capital and partner with these world-class financial institutions further demonstrates the financial strength of the Company. With this added financial flexibility, we plan to continue the strategic growth of our business, both through acquisitions, as well as investments in our operations to further drive organic growth.
Lawson Products, Inc. (NASDAQ: LAWS) ("Lawson" or the "Company"), a distributor of products and services to the MRO marketplace, has entered into a new credit agreement increasing its maximum borrowing capacity from $40 million to $100 million. The new agreement also includes an accordion feature, subject to certain criteria as well as obtaining additional commitments from its lenders that would provide meaningful additional borrowing capacity. The five-year agreement provides for increased capacity for future acquisitions, combines multiple existing credit facilities and lowers borrowing spreads and unused commitment fees. "We are extremely pleased to expand our bank group to include JPMorgan Chase and Bank of America and continue our long-term relationship with CIBC Bank USA, which allows us to access additional capital," said Ron Knutson, executive vice president and chief financial officer. "Our ability to significantly increase our access to capital and partner with these world-class financial institutions further demonstrates the financial strength of the Company. With this added financial flexibility, we plan to continue the strategic growth of our business, both through acquisitions, as well as investments in our operations to further drive organic growth.
Lawson Products (NASDAQ: LAWS) latest stock valuation
So what is Lawson Products stock worth based on the release of their latest earnings report? Based on Lawson Products latest earnings report our valuation models provide a target (full value) price for Lawson Products stock at $34.90 a stock. We therefore believe that the stock of Lawson Products is overvalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $34.90 Therefore we believe a good entry point into Lawson Products stock is at $31.40 or below. We expect the stock price of Lawson Products to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $34.90 Therefore we believe a good entry point into Lawson Products stock is at $31.40 or below. We expect the stock price of Lawson Products to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
Next earnings release date for Lawson Products
It is expected that Lawson Products 4th quarter and full fiscal 2019 earnings report will be released in late January 2020.