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Target Hospitality Corp. TH reported third-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. However, the top and bottom lines declined on a year-over-year basis.

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Following the results, the company's shares gained 6.8% during trading hours yesterday. Positive investor sentiments were witnessed as the company reported strong customer demand and a high degree of revenue visibility. TH is pursuing both organic growth and selective inorganic opportunities aligned with its core competencies, all while prioritizing disciplined capital use. The company aims to achieve zero net debt by 2024 end.

TH’s Q3 Earnings and Revenues

In the quarter under review, the company reported an adjusted earnings per share (EPS) of 20 cents, beating the Zacks Consensus Estimate of 12 cents per share. In the prior-year quarter, the company reported an adjusted EPS of 43 cents.

Total revenues of $95.2 million beat the consensus estimate of $88 million by 8.3%. However, the top line declined 34.8% year over year.

Target Hospitality Corp. Price, Consensus and EPS Surprise

Target Hospitality Corp. price-consensus-eps-surprise-chart | Target Hospitality Corp. Quote

TH Segments Discussion

Government: During the quarter, revenues in this segment amounted to $53.5 million, compared with $105.5 million reported in the year-ago quarter. The segment's adjusted gross profit came in at $46.3 million compared with $90.5 million reported in the prior-year quarter.

The declines were largely due to the non-cash, one-time Infrastructure Revenue Amortization related to the Company’s PCC community, which was fully amortized by November 2023. Additionally, the lower PCC minimum lease and variable services revenues and the termination of the STFRC Contract (on Aug. 9, 2024) added to the downside.

Hospitality & Facilities Services - South: During the third quarter, revenues in this segment amounted to $38 million compared with $37.5 million reported in the year-ago quarter.

During the quarter, average utilized beds came in at 5,614 compared with 5,342 reported in the prior-year quarter. The average daily rate came in at $72.96 compared with $75.71 reported in the prior-year quarter. The upside was backed by the company’s premier service offering. The segment's adjusted gross profit came in at $12.3 million compared with $14.1 million reported in the prior-year quarter.

All Other: Revenues of this segment amounted to $3.7 million, compared with $2.9 million reported in the year-ago quarter.

TH’s Operating Highlights

During the third quarter of 2024, the company’s selling, general and administrative expenses amounted to $13.3 million compared with $15.3 million reported in the prior-year period.

Net income during the quarter came in at $20.1 million compared with $45.6 million reported in the prior-year quarter.

Adjusted EBITDA during the quarter came in at $49.7 million compared with $95 million reported in the prior-year quarter.

Balance Sheet

As of Sept. 30, 2024, TH’s cash and cash equivalents amounted to $177.7 million compared with $103.9 million as of Dec. 31, 2023.

TH’s 2024 Outlook

In 2024, the company anticipates revenues in the range of $375 to $385 million. The company expects adjusted EBITDA to be in the range of $184-$190 million. TH expects total capital spending in 2024 to be in the range of $25 to $30 million.

TH’s Zacks Rank

Target Hospitality carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

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Zacks Investment Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company value investors might notice is Carnival (CCL). CCL is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 14.96 right now. For comparison, its industry sports an average P/E of 21.78. Over the past year, CCL's Forward P/E has been as high as 20.38 and as low as 10.05, with a median of 13.44.

Another notable valuation metric for CCL is its P/B ratio of 3.30. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 5.91. CCL's P/B has been as high as 3.30 and as low as 1.98, with a median of 2.66, over the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CCL has a P/S ratio of 1.16. This compares to its industry's average P/S of 1.31.

Finally, investors will want to recognize that CCL has a P/CF ratio of 8.20. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. CCL's current P/CF looks attractive when compared to its industry's average P/CF of 17.99. CCL's P/CF has been as high as 24.17 and as low as 5.11, with a median of 6.73, all within the past year.

These are only a few of the key metrics included in Carnival's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, CCL looks like an impressive value stock at the moment.

Zacks Investment Research