Target Hospitality Corp : Oppenheimer Reinstates Coverage With Perform Rating

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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