BMO Capital Markets has adjusted its outlook on Patrick Industries (NASDAQ: NASDAQ:PATK), a manufacturer and distributor of component products for the recreational vehicle, marine, and manufactured housing industries.
The firm increased the price target to $135 from the previous $125 while maintaining an Outperform rating on the stock.
Patrick Industries reported a better-than-expected second quarter for the fiscal year 2024, with adjusted earnings per share (EPS) of $2.16. The figure surpassed both BMO Capital's estimate of $1.99 and the consensus on Wall Street of $2.05.
The reported earnings also showed an improvement from the $1.94 EPS recorded in the same quarter of the previous year.
The company's performance in the quarter was noted as broadly exceeding expectations.
However, the aBMO analyst highlighted that strict inventory management by dealers and original equipment manufacturers (OEMs) in the recreational vehicle and marine sectors could lead to softer production rates and a more cautious outlook for second-half demand.
Despite these near-term challenges, Patrick Industries is seen to benefit from its strategic expansion into new markets. The acquisition of Sportech, a company specializing in designing, developing, and manufacturing custom-molded components for powersports, has reportedly exceeded expectations and contributes to the company's diversification strategy.
Patrick reported a 4% revenue increase in the first quarter of 2024, reaching $933 million, and a significant 16% growth in net income, which rose to $35 million. The financial performance is linked to strategic growth initiatives, including the acquisition of Sportech, strengthening the company's foothold in the Powersports industry.
Despite a decrease in marine wholesale powerboat unit shipments, the company's gross margin improved. Roth/MKM maintained a positive outlook on the company, reiterating a Buy rating with a steady price target of $126.00.
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