FirstService (NASDAQ:FSV – Get Free Report) (TSE:FSV) released its earnings results on Thursday. The financial services provider reported $1.89 earnings per share for the quarter, beating analysts’ consensus estimates of $1.84 by $0.05, Briefing.com reports. FirstService had a net margin of 2.59% and a return on equity of 18.18%. The firm had revenue of $1.51 billion during the quarter, compared to the consensus estimate of $1.48 billion. During the same period in the prior year, the firm earned $1.76 EPS. The company’s revenue was up 5.8% compared to the same quarter last year.
Here are the key takeaways from FirstService’s conference call:
- FirstService delivered solid Q3 results, with revenue up 6% to $1.53 billion, organic growth of 4%, adjusted EBITDA up 3%, and adjusted EPS up 7% to $1.89. Management expects similar mid-single-digit consolidated revenue growth in Q4 and mid-single-digit growth for the full year.
- FirstService Residential continued to improve profitability, with Q3 EBITDA margin expanding 30 basis points to 11.3% and eight consecutive quarters of margin improvement. Management expects more significant margin expansion in Q4, aided by labor efficiencies and the exit from the loss-making non-core aquatics operation.
- Roofing remains the largest pressure point: Q3 revenue fell 4% reported and at a high-single-digit organic rate, while competitive pricing and lower volumes compressed margins. Although backlog improved sequentially, management expects continued margin pressure in Q4 and only flat to slightly declining organic growth, particularly due to difficult Florida conditions.
- Restoration revenue increased 10% in Q3, supported by activity in Canada and Hawaii, mitigation work, and newly won large-loss projects; management expects mid- to high-single-digit growth in Q4. The recent Hurricane Isaias generated some work but is expected to have an immaterial impact on results.
- The company repurchased 2.2 million shares for more than $300 million in Q3, bringing year-to-date buybacks to 9% of shares outstanding, but net leverage rose to 2.4x from 1.8x due to the repurchases. Management intends to make future buybacks more judicious and generally align them with free cash flow, acquisition opportunities, and valuation.
FirstService Stock Performance
Shares of FSV stock traded down $3.55 during trading on Friday, reaching $143.67. 221,591 shares of the company’s stock traded hands, compared to its average volume of 131,217. The firm’s 50-day moving average is $135.75 and its 200 day moving average is $138.78. The company has a market capitalization of $6.27 billion, a P/E ratio of 43.80, a PEG ratio of 3.26 and a beta of 0.95. FirstService has a 1 year low of $119.41 and a 1 year high of $171.88. The company has a current ratio of 1.63, a quick ratio of 1.63 and a debt-to-equity ratio of 1.03.
FirstService Announces Dividend
The firm also recently declared a quarterly dividend, which was paid on Wednesday, October 7th. Investors of record on Wednesday, September 30th were paid a dividend of $0.3050 per share. This represents a $1.22 dividend on an annualized basis and a dividend yield of 0.8%. The ex-dividend date was Wednesday, September 30th. FirstService’s dividend payout ratio is presently 37.20%.
Key Headlines Impacting FirstService
Here are the key news stories impacting FirstService this week:
- Positive Sentiment: TD raised its price target from $195 to $203 and upgraded FirstService to “buy,” implying substantial upside from recent levels. TD analyst rating
- Positive Sentiment: Stifel Nicolaus increased its target from $185 to $195 and maintained a “buy” rating. Stifel Nicolaus analyst rating
- Positive Sentiment: Scotiabank raised its target from $170 to $175 while moving to a “sector outperform” rating, adding to the constructive analyst outlook. Scotiabank analyst rating
- Positive Sentiment: Third-quarter revenue rose 5.8% year over year to $1.53 billion, while adjusted EPS increased to $1.89 from $1.76 and adjusted EBITDA grew to $169.7 million. Revenue and adjusted EPS exceeded the primary analyst consensus. FirstService third-quarter results
- Neutral Sentiment: Scotia’s $175 target still carries a “sector perform” rating in one report, indicating that valuation and near-term industry conditions may limit upside despite higher estimates. Scotia analyst rating
- Neutral Sentiment: Recent commentary described FirstService as potentially fully priced after a prolonged five-year decline, suggesting investors may require stronger earnings momentum before bidding the stock higher. FirstService valuation commentary
- Negative Sentiment: GAAP operating earnings fell 7.1% to $107.4 million, while GAAP diluted EPS declined to $0.99 from $1.24 and net income attributable to common shareholders dropped 24.9%. The results point to a margin squeeze despite solid top-line growth.
- Negative Sentiment: Management’s earnings call highlighted a drag from the roofing business, which may keep profitability under pressure. Cash generation also weakened, and total liabilities increased to approximately $3.0 billion. FirstService earnings call highlights
Analysts Set New Price Targets
Several equities analysts recently commented on FSV shares. TD Securities reiterated a “buy” rating and issued a $195.00 price objective on shares of FirstService in a research note on Friday, July 24th. BMO Capital Markets reissued an “outperform” rating and set a $179.00 price objective on shares of FirstService in a report on Friday. TD raised their target price on FirstService from $195.00 to $203.00 and gave the stock a “buy” rating in a research report on Friday. Wall Street Zen lowered FirstService from a “buy” rating to a “hold” rating in a research note on Saturday, August 1st. Finally, Canadian Imperial Bank of Commerce boosted their target price on FirstService from $170.00 to $178.00 and gave the company an “outperform” rating in a research note on Friday. Eight research analysts have rated the stock with a Buy rating and four have given a Hold rating to the stock. Based on data from MarketBeat.com, the company presently has an average rating of “Moderate Buy” and an average target price of $179.82.
Check Out Our Latest Analysis on FSV
About FirstService
FirstService Corporation is a Canadian provider of property management and property services serving customers primarily in the United States and Canada. The company operates through two main businesses: FirstService Residential and FirstService Brands.
FirstService Residential provides property management services for condominium and homeowners’ associations, cooperatives, and other residential communities. Its services include community administration, financial management, maintenance coordination, customer support, and related operational services.
FirstService Brands operates and supports a network of property-service businesses, including companies involved in property restoration, painting, flooring, window treatments, and other residential and commercial services.
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