JB Poindexter expects weak 2H20 earnings followed by 2021 turnaround
JB Poindexter’s adjusted EBITDA fell by more than half in 2Q20, according to two sources following the company. However, investors are optimistic that earnings will bounce back next year, a sentiment that has helped support its above-par bond levels, they said.
As a part of 2Q20 earnings, the trucking manufacturer guided that earnings are expected to continue to be weak through the end of 2020, with a rebound expected in 2021, the sources added.
Sources said they expect the pent-up demand for truck bodies to translate to more revenue for the company as driving trends recover.
The privately owned company’s 2Q20 revenue declined to USD 290.1m, compared to USD 462.5m in 2Q19 because of a decline in the company’s Morgan division, offset by an increase in the Morgan Olson division, the sources said. Gross profit totaled USD 32m, compared to USD 91m in 2Q19.
Meanwhile, adjusted EBITDA for the quarter shook out to USD 19.2m, down from USD 57.9m in 2Q19, the sources added. JB didn’t include any addbacks attributed to the COVID-19 pandemic, the sources said.
JB’s revenue can be split into two divisions: Morgan and Morgan Olson. The Morgan division, which manufactures truck bodies for class 5-7 trucks in North America, is expected to decline throughout 2020. On the other hand, the Morgan Olson division, which manufactures step vans used by last-mile delivery companies including UPS and the USPS, has benefitted from increased online shopping and is expected to perform well through 2021.
As of 30 June, liquidity totaled roughly USD 253m through USD 100m of revolver availability and USD 153m of cash.
The company is 3.8x levered through USD 350m of total debt and USD 91.9m of LTM adjusted EBITDA.
Moody’s expects the company to burn roughly USD 20m in 2020, and transition to moderately positive free cash flow in 2021, assuming growth returns in the company’s Morgan division, according to a 2 June report.
The issuer’s USD 350m 7.125% senior unsecured notes due 2026 last traded at 106.75 to yield 4.422% on 10 September, up from trades at 104.625 to yield 5.72% before the earnings report, according to MarketAxess. The notes have recovered from the low 90s, yielding around 9%, at the beginning of the pandemic in March.
JB Poindexter did not respond to a request for comment.
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