- Colliers Securities analyst Richard Ryan downgraded Graham Corp (NYSE:GHM) from Buy to Neutral.
- Maxim Group analyst Tate Sullivan lowered the price target on Graham to $15 (an upside of 79.6%) from $17 and maintained a Buy rating on the shares.
- Yesterday, the company reported third-quarter revenue growth of 6% year-over-year to $28.77 million, missing the consensus of $36.53 million.
- Sales to the defense industry were $16.6 million, up from $4.5 million, while sales to the refining industry were $4.0 million, down from $16.5 million.
- The gross margin fell to 1.9% from 22.9% a year ago. The company reported an operating loss of $(4.6) million, compared to a profit of $1.3 million a year ago.
- EPS loss was $(0.35) versus $0.11, missing the consensus of $0.21.
- Reported an adjusted EBITDA of loss $(2.6) million, compared to $1.8 million a year ago.
- The company says the significant decline in gross profit and contraction of gross margin reflected the higher-than-expected costs related to the defense business at its Batavia operations.
- It held cash and equivalents of $14 million. Net cash used by operating activities for the nine months was $14.6 million compared with $0.7 million of cash generated a year ago.
- The company suspended its dividend subject to its analysis of capital allocation priorities and any requirements of a revised lending agreement.
- Backlog at December 31, 2021, was $272.6 million, a 17% increase from $233.2 million at September 30, 2021. The company expects ~40% - 50% of orders currently in the backlog to be converted to sales within one year.
- FY22 Guidance: Graham lowered its revenue outlook to $120 million - $125 million from $130 million - $140 million, below the consensus of $132.25 million.
- It sees Adjusted EBITDA to be a loss of ~$(5) million (prior view $7 million - $8 million).
- It expects a gross margin of ~8% - 10% (previous view 17% - 18%).
- 4Q Outlook: The company expects revenue of $37 million - $42 million and breakeven adjusted EBITDA.
- Price Action: GHM shares are trading lower by 28.89% at $8.37 on the last check Tuesday.
