Markets

Analyst Actions: Enerflex Ests Raised at Credit Suisse

Q4: The Good, the Bad, and the Outlook; Raising Estimates

What to do with EFX shares? Hold on to what you own if you believe in a cyclical rebound in natural gas demand and higher margins longer term driven by an increase in the services mix. We prefer the sidelines for now given low visibility beyond this year and current natural gas prices.

Numbers: EFX reported Q4 EPS of $0.23 versus our estimate of $0.21. The beat to our number came from higher revenues in the international business and good cost control. EFX does not give specific guidance but expects margins to be up yr/yr in 2012.

Estimates: Our 2012 EPS estimate goes to $0.81 (from $0.79) based on minor adjustments to our model and better mix driven by gas processing. Our 2013 EPS estimate goes to $0.91 (from $0.89).

The Good: (1) Oman order (~$228mm); (2) expansion of Houston facility on track; (3) expect higher services mix longer term; (4) higher margin backlog yet to roll through P&L; and (5) healthy balance sheet.

The Bad: (1) low natural gas prices; (2) lower gross margins in South America and Southern US business (timing related); (3) low visibility beyond 2012 on project pipeline; and (4) low horsepower unit sales in 2011; and (5) lack of higher margin pipeline projects in 2011.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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