Analyst Trims Superior Group Of Companies' Price Target By 10% Amidst Macro Uncertainty

Barrington Research analyst Kevin Steinke reiterated an Outperform rating on the shares of Superior Group of Companies Inc SGC and lowered the price target from $19 to $17.
The company's Q4 sales increased 4.6% Y/Y to $148.6 million, better than the analyst's estimate of $141.7 million.
During 2022, Superior combined its non-healthcare uniforms business, called HPI, with its promotional products business, called BAMKO, to form the Branded Products (BP) segment.
BP segment revenue increased 6.5% YOY to $102.0 million, driven by the acquisitions of two promotional products businesses.
Q4/22 revenue in the Healthcare Apparel segment was down 13.4% Y/Y to $26.4 million due to the ongoing market slowdown that followed accelerated stockpiling of healthcare apparel inventory by the company's clients end-consumers.
Q4/22 adjusted EBITDA declined 58% YOY to $3.5 million. Superior ended 2022 with a net debt to EBITDA leverage ratio of 3.85x.
Management anticipates that the company will likely exceed its maximum financial covenant leverage ratio of 4.0x in the near term based on the inventory write-down that reduced Q4/22 EBITDA and its financial forecast for 2023, noted the analyst.
Superior provided 2023 revenue guidance for the first time that calls for revenue of $585-595 million, up 1.1% to 2.8% Y/Y.
The company provided 2023 EPS guidance of $0.92-0.97, up 48% to 56% from adjusted EPS of $0.62 in 2022. This was lower than the analyst's prior estimate of $1.40.
The analyst has updated the 2023 revenue guidance to $590.6 million and EPS estimate to $0.92.
The analyst attributed the price target reduction to 2023 guidance and a more conservative valuation assumption due to current economic uncertainty.
Price Action: SGC shares are trading flat at $7.91 on the last check Tuesday.

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