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Macquarie (MIC) Up 3.2% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Macquarie (MIC). Shares have added about 3.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Macquarie due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Macquarie Q4 Earnings and Revenues Miss Estimates

Macquarie reported disappointing results for fourth-quarter 2018, wherein its adjusted earnings and revenues lagged the Zacks Consensus Estimate.

The company's adjusted earnings for the quarter came in at 45 cents per share, missing the consensus estimate of 54 cents by 16.7%. Also, the figure was lower than 59 cents per share reported in the year-ago quarter. Notably, higher operating costs along with rise in interest expenses were primarily responsible for the year-over-year decline.

Macquarie generated revenues of $437.8 million, up 0.4% year over year.  The top line was driven by solid operational growth in the Atlantic Aviation segment. Product revenues grew 8.8% while Service revenues fell 0.9%. However, revenues missed the Zacks Consensus Estimate of $453.4 million.

For full-year 2018, the company's adjusted earnings came in at $1.60 per share, down 68.8% on a year-over-year basis.

Macquarie reported revenues of $1,761.5 million for the year, up 5.6% from 2017.

Segment Details

Revenues from the International-Matex Tank Terminals (IMTT) segment came in at $123.8 million, down 11.1% year over year. It represented 28.3% of the company's fourth-quarter revenues. The segment's EBITDA declined 20.4% to $65.1 million due to persistent fall in capacity utilization levels.

The Atlantic Aviation segment generated revenues of $247.5 million, up 9.8% year over year and accounting for 56.5% of the company's overall revenues. The segment's EBITDA rose 11.4% to $68.5 million on the back of contributions from acquired fixed base operations as well as rise in hangar rental income and ancillary services fees.

Revenues in the MIC Hawaii segment were down 8.7% year over year to $66.3 million. It represented 15.1% of overall quarterly revenues. The segment's EBITDA increased 21.3% from the prior-year quarter.

Operating Costs

In the reported quarter, Macquarie's cost of services and cost of product sales increased 5.3% and 40.7% year over year, respectively. Selling and administrative expenses also increased 10.7%. Overall, operating expenses rose 7.1% to about $391.2 million.

Notable Developments

Macquarie is undertaking initiatives for the repurposing and repositioning of certain IMTT assets, to better align the unit according to shifts in global demand and trade flows. Notably, IMTT is working on developing new storage capacity and capabilities. As a matter of fact, this is likely to strengthen operations of two of the business' terminals on the Lower Mississippi River.

Liquidity & Cash Flow

As of Dec 31, 2018, the company had cash and cash equivalents of $588.6 million and long-term debt of about $2,652.7 million. Its adjusted free cash flow for the quarter fell 13.9% year over year to $439.5 million, hurt by increase in interest expenses, taxes, maintenance and capital expenditures.

Guidance

For 2019, Macquarie anticipates EBITDA of $610-$635 million and free cash flow of $400-$445 million. Also, it predicts net debt/EBITDA ratio of 4-4.25 by the end of the year.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.


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