On Tuesday, B.Riley Financial updated its outlook on RF Industries Ltd. (NASDAQ:RFIL) shares, increasing the price target to $4.50 from the previous target of $4.25. The firm continues to endorse a Buy rating for the stock. The adjustment follows RF Industries' report of third-quarter sales for fiscal year 2024, which, despite falling short of consensus estimates, showed a year-over-year increase of 7.6% and a quarter-over-quarter rise of 4.5%.
RF Industries reported sales of $16.8 million for the third quarter, which is $1 million less than the anticipated $17.8 million. However, the company's gross margin exceeded expectations at 29.5%, nearing its short-term goal of 30%. This is attributed to a more favorable production mix.
Both EBITDA and pro forma EPS were below the consensus, coming in at $0.5 million and $(0.01) respectively, as opposed to the expected $1.0 million and $0.06. Despite this, the figures show a significant improvement from the previous year.
The company's bookings for the quarter were strong at $18.9 million, and it closed the period with a backlog of $20.1 million. As of September 16, the backlog stood at $19.5 million, which is an increase from $18.0 million at the end of the second quarter. The firm noted that RF Industries has been recovering from the downturn caused by reduced capital expenditures from wireless carriers in 2023.
RF Industries is experiencing heightened demand for its higher-value products, including Direct-Air Cooling (DAC) solutions and integrated small cell solutions. The company has launched regional DAC deployment programs, which are expected to expand nationally. Management anticipates further sequential improvement in the fourth quarter and suggests that profitability could see significant gains, especially as quarterly revenue exceeds $18 million.
In light of these developments and the company's improved sales momentum and cost structure, B.Riley has raised the price target. The new target is set despite RF Industries' shares currently trading below the ten-year average of approximately $5 per share.
In other recent news, RF Industries Ltd. has announced significant developments from its Annual Meeting of Stockholders. The company's shareholders have elected Mark K. Holdsworth and Kay L. Tidwell as Class I directors, with terms expiring at the 2027 Annual Meeting. The shareholders also approved amendments to the company's equity incentive plan, increasing the number of shares available for issuance under this plan by 1,000,000 shares.
Furthermore, the compensation of the company's named executive officers was approved on a non-binding advisory basis. In the final proposal, shareholders ratified the appointment of CohnReznick LLP as the company's independent registered public accounting firm for the fiscal year ending October 31, 2024.
These recent developments reflect shareholder support for the company's governance and strategic plans, and suggest an emphasis on employee incentives and potential future growth strategies.
InvestingPro Insights
Following B.Riley Financial's updated outlook on RF Industries Ltd. (NASDAQ:RFIL), a glimpse into the company's financial health and market performance through InvestingPro data and tips provides additional context for investors.
With a market capitalization of $44.55 million, RF Industries shows a significant return over the last six months, with a price total return of 27.83%. This upward trend is also reflected in the short-term, with a one-week price total return of 9.11% and a one-month return of 13.18%, indicating a robust performance in the recent market.
Despite the positive price momentum, the company's financials present a mixed picture. RF Industries has not been profitable over the last twelve months, as evidenced by a negative P/E ratio of -5.54. Moreover, revenue has declined by 30.16% over the last twelve months as of Q2 2024, and analysts anticipate a sales decline in the current year. However, it is worth noting that analysts predict the company will be profitable this year, which may align with management's expectations of improved profitability as quarterly revenue surpasses $18 million.
InvestingPro Tips suggest that while RF Industries does not pay a dividend, its strong return over the last three months could be of interest to growth-focused investors. For those considering RF Industries as part of their investment portfolio, additional insights are available on InvestingPro, which includes a total of 8 tips for a more comprehensive analysis.
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