Thursday, Stephens raised the stock price target on DXP Enterprises (NASDAQ:DXPE) to $75 from $65, maintaining an Overweight rating on the stock. The firm's decision comes after the company reported third-quarter results that surpassed revenue, adjusted EBITDA, and adjusted EPS estimates.
DXP Enterprises showcased revenue of $473 million against the $443 million expected, an adjusted EBITDA of $52 million over the $47 million forecast, and an adjusted EPS of $1.43, significantly higher than the anticipated $0.95.
The performance was attributed to growth across its divisions, with Service Centers seeing a revenue increase of 7.6% year-over-year and an EBIT margin improvement of approximately 50 basis points to 14.6%. The Innovative Pumping Solutions division experienced a remarkable 52.3% year-over-year revenue surge, with EBIT margins increasing by roughly 135 basis points to 20.3%.
Supply Chain Services reported a modest revenue growth of 0.7% year-over-year, although its EBIT margin saw a slight decline of about 10 basis points to 8.4%.
DXP Enterprises has demonstrated consistent execution strength, marked by another quarter with an adjusted EBITDA margin exceeding 10%. The company's healthy free cash flow generation of $24 million facilitated an additional $5 million in share repurchases and the closure of another acquisition during the third quarter of 2024.
The firm's merger and acquisition strategy has been significant throughout the year, with seven acquisitions completed year-to-date and two more expected to close by early 2025.
In light of these developments, Stephens reiterated its Overweight rating on DXP Enterprises. The analyst noted the company's impressive quarterly performance and strategic acquisitions as key factors for the increased price target.
In other recent news, DXP Enterprises has reported significant growth in its third quarter for 2024, with total sales reaching $472.9 million, marking a 12.8% year-over-year increase. The company's adjusted EBITDA also saw a substantial rise of 19.1%, growing to $52.4 million. The Innovative Pumping Solutions (IPS) segment led this growth, with a 52.3% increase in sales.
Furthermore, DXP Enterprises has announced the completion of two acquisitions, Burt Gurney & Associates (BGA) and MaxVac Inc. These acquisitions, funded with cash from DXP's balance sheet, are expected to expand the company's geographic reach and capabilities. BGA and MaxVac reported combined sales and adjusted EBITDA of approximately $11.7 million and $1.6 million, respectively, for the twelve months ending September 30, 2024.
The company has also emphasized its strategic growth through acquisitions, having completed seven in 2024, and expects to finalize more by the end of Q1 2025. Despite Q4 revenue expected to be slightly softer historically, DXP Enterprises remains optimistic about maintaining solid sales growth and EBITDA margins in the upcoming quarters.
These recent developments reflect DXP Enterprises' commitment to growth through strategic acquisitions and enhancing financial controls.
InvestingPro Insights
DXP Enterprises' recent performance aligns with several key metrics and trends highlighted by InvestingPro. The company's strong quarterly results are reflected in its impressive stock performance, with InvestingPro data showing a 34.05% return over the last week and a 95.51% return over the past year. This surge has brought the stock price to 99.31% of its 52-week high, underscoring the market's positive reaction to the company's recent earnings beat and strategic initiatives.
InvestingPro Tips further support the bullish sentiment. One tip notes that "Management has been aggressively buying back shares," which is consistent with the $5 million share repurchase mentioned in the article. Additionally, the tip indicating that DXPE is "Trading at a low P/E ratio relative to near-term earnings growth" suggests that despite the recent price surge, there may still be value in the stock. This is particularly relevant given the company's strong performance across its divisions and its active M&A strategy.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips that could provide further insights into DXP Enterprises' financial health and market position.
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