- 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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