On Friday, Driven Brands (NASDAQ:DRVN) received a price target increase from Canaccord Genuity, now aiming for $19.00, up from the previous $17.00, while the Buy rating remains unchanged. The automotive services company unveiled mixed financial results before the market opened, with sales slightly trailing the consensus by approximately 3%. Same-store sales showed a modest increase of 0.5%, which did not meet the expected 1.9%.
Despite the sales shortfall, Driven Brands demonstrated stronger profitability. The adjusted EBITDA margin outperformed expectations by roughly 125 basis points. Additionally, the company reported an adjusted earnings per share (EPS) of $0.35, surpassing the consensus estimate of $0.28. These positive earnings figures have contributed to the revised price target.
The company also announced the appointment of Mr. Michael Diamond as its new Chief Financial Officer. Mr. Diamond brings extensive experience in managing multi-unit retail operations, which could be a strategic advantage for Driven Brands moving forward. His expertise may be particularly valuable as the company navigates current challenges in its U.S. Car Wash segment and the broader collision industry, amid general economic uncertainties.
In light of these factors, Canaccord Genuity has adjusted its revenue forecasts for Driven Brands to the lower end of the company's previous guidance range. The decision to increase the price target to $19 reflects the firm's confidence in Driven Brands' earnings potential.
The analyst suggests that an expansion in the company's multiple is plausible, should there be a significant improvement in the U.S. Car Wash business or if it is successfully divested, a possibility that was not dismissed in the recent earnings call.
In other recent news, Driven Brands has been the focus of several significant developments. The company's Q2 earnings report indicated a slight shortfall in sales but a notable increase in EBITDA and EPS.
Despite some challenges, commercial sales continue to grow steadily. Piper Sandler adjusted its outlook on Driven Brands, raising the price target to $17.00 from $14.00 while maintaining an Overweight rating, based on a maintained multiple assumption of 15 times the projected EPS for 2025.
RBC Capital Markets also adjusted its outlook, raising the price target to $16.00 from $14.00 and maintaining an Outperform rating.
The company has appointed Michael Diamond as its new Chief Financial Officer, bringing a wealth of financial expertise to the role. Driven Brands has also secured $675 million in funding through two series of senior secured notes, providing the company with additional financial flexibility.
BMO Capital initiated coverage on Driven Brands with a Market Perform rating and a price target of $14.00, acknowledging the company's significant untapped potential for cross-selling services across its customer base.
InvestingPro Insights
Recent data from InvestingPro underscores the nuanced financial landscape of Driven Brands (NASDAQ:DRVN), with a market capitalization of $2.28 billion reflecting its standing in the automotive services sector. Despite a challenging earnings backdrop, as indicated by a negative P/E ratio of -3.04 and an adjusted P/E ratio for the last twelve months as of Q2 2024 at -44.62, the company has maintained a steady revenue growth of 4.18% in the same period. This growth, albeit modest, is consistent with the company's trajectory of expansion.
InvestingPro Tips highlight the company's solid gross profit margin of 41.13%, a testament to its ability to maintain profitability in a competitive market. Additionally, Driven Brands' price is currently at 89.07% of its 52-week high, suggesting a level of resilience in its stock value amidst market fluctuations. For investors seeking more in-depth analysis, InvestingPro offers over 30 additional tips that could provide further insights into the company's financial health and investment potential.
The insights provided by InvestingPro, including the company's revenue growth and gross profit margin, align with the positive earnings figures reported by Driven Brands. These metrics may lend support to Canaccord Genuity's optimistic price target, despite the sales shortfall and modest same-store sales increase. As Driven Brands continues to navigate the economic landscape with its new CFO at the helm, investors and analysts alike will be watching closely to see if the company can leverage its profitability and sustain its market position.
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