www.appliedproductivity.com
On November10 Algonquin Power released it's third quarter results.It shows substantial increases for revenues and even greater increases in net income and adjusted EBITDA.Revenues increased by more than 15% to $221 million while adjusted net earnings increased by almost 60% and adjusted EBITDA increased by 30% to $91 million.More importantly adjusted funds from operations increased by about 15% to $61 million.
Nine month Operations
Revenues grew at a slower pace for the 9 month period;revenues were ahead by only 3% to $786 million for the third quarter.While adjusted net earnings were ahead by about 40% for the period.The more important adjusted EBITDA increased by about 28% over the third quarter of 2016.While adjusted funds from operations increased by about 20%.This shows that the growth in revenues have tailed off but existing projects have become more profitable.Algonquin management attributes the increased earnings to the newly acquired Park Water System.
New Projects
Algonquin Power management has correctly realized that it needs to have new projects to steepen it's growth path for earnings.So in late 2015 they acquired the Park Water System and in 2016 they built the O'dell wind farm and now they are trying to complete the requirements for the acquisition of the Empire Electric Company.All of these are large projects and all are starting to influence earnings.AQN attributes the increase in earnings in this quarter to the Park Water System and O'dell will be impacting earnings in the fourth quarter.Empire will likely be coming onstream for revenues and earnings in 2017.These are all American systems and two of the three are regulated systems with in most cases steady growth in earnings.Most Canadians (including this author) were sceptical of the expected treatment by American regulators.But with a few exceptions the regulators have been very business-like. In fact, AQN's free cash flow has been robust enough for it to declare an increase in their 2016 dividend;it now stands at $.1435 per quarter.And with the expected increase in adjusted EBITDA in 2017 this blog expects a further increase in the dividend in 2017.
The Fourth Quarter
Increases in revenues have started to flatten for Algonquin although they have shown good ,steady increases in earnings.Faced with this situation Algonquin realizes that they need big projects and went out and got them.In the 2016-2017 period they picked up three large producers of earnings;two are regulated and one has a long term power agreement.AQN has shown good increase in earnings in the past and needed not only the same increase in earnings but a steepening curve.And they have done so.
Regulators have their risks too
In 2015 Algonquin Power announced that it was acquiring the Park Water System in the western USA and they were building the O'dell wind farm in Minnesota and trying to acquire the Empire Electric Company in Kansas and Missouri.At the time the price of AQN shares was about $10.00 to $10.50 a share.The yield was about 4%The regulators did slow things down but the Park Water System went ahead and soon the O'dell wind farm was built.The share price moved ahead to a high of $12.50 but it dropped in August to the $10.50 area and it has hovered here.Regulators slowed down the acquisition of the Empire Electric Company.Now the Park Water System is adding to earnings according to AQN management.Not the O'dell wind farm yet.Although AQN expects to hit $500 to $525 million adjusted EBITDA or $2.00 a share the price has not bounced back to it's summer levels.This although the yield is now more than 5%.
It is possible that investors are still nervous about American regulators even with the higher yield.This blog predicts that once the yearend adjusted EBITDA of $500 to $525 million comes in the stock will push back to it's summer levels.Also I am sure that investors want to see revenues and earnings coming in from O'dell this year and Empire next year.This is likely the catalyst to send Algonquin to new levels above $13.
use Workathon for business predictions ; use Workathon for business solutions
On November 9 Chorus came out with their latest quarter's results.They have been restructuring fro several quarters now and find themselves in a place where they can diversify even further.Chorus tells it's readers that total revenues were down from Q3 2015 while adjusted EBITDA was ahead by only 2%.But Chorus has made quite a few changes since then.This includes increasing their leasing revenue under the CPA by 51% to $72 million.They have also streamlined their Voyageur business and established a Voyageur Avparts business.Lastly they have established a relationship with Air Nostrum(Spanish) and leased 4 aircraft to them.
The third Quarter
Chorus showed investors adjusted EBITDA of $70 million and states that it is only 2% better than Q3 2015.But it was about 40% better than Q1 and Q2 of 2016.In fact both Qtrade and Yahoo Finance estimate 2016 adjusted EBITDA of only $66-$70 million.It seems that the financial websites have underestimated the 2016 Chorus performance.For 9 months Chorus shows that although revenues were down adjusted EBITDA was recorded at $179 million.This blog estimates that total 2016 adjusted EBITDA will be at about $250 million and earnings per share (e.p.s.) of about $2.05.This is well above the present dividend of $.48 but Chorus does have some extraordinary items to consider also.For example, net income was $99 million for 9 months and was helped by a smaller foreign exchange loss than in 2015.But free cash flow is big enough for Chorus management to start looking at an increase in the dividend soon.
The Fourth Quarter
Should Chorus show increases in aircraft leasing revenues and Voyageur revenues in Q4 they will be in a position to raise the dividend back to the old level of $.60 per share.Maybe not in one step but perhaps in two steps.Perhaps investors will get more information then on their progress on Air Canada Express.But there should be no doubt that many investors will be impressed with their diversification strategy. use Workathon for business forecasts ; use Workathon for business consulting
Workathon is the blog I use for new subjects and to explore new areas or new companies.This post is dedicated to a company not previously covered by either of my two Blogger blogs. Tucows is an uprising Canadian technology stock trading at about $42 a share. On November7 Tucows released it's third quarter results;they were substantially better than most of it's competitors.In particular,the results were better than that of Kinaxis, another Canadian company with a much larger market capitalization.
How do the Numbers Look?
(a)Earnings
For starters Tucows had positive earnings per share while Kinaxis is still showing negative earnings and e.p.s.Tucows had a 55% increase in e.p.s over 2015 at a record of $.45 per share.It's P/E ratio was high at 25 times but for a software company was remarkably low.Shopify, for example, shows a P/E ratio of 55 times.And Kinaxis has a P/E ratio of -(464).Tucows only shows a modest growth of revenue at 11% but adjusted EBITDA grew by 48% over 2015 to $8.6 million.
(b) Growth
It's two main products are Ting Mobile and it's domain services for the internet.Their Ting Mobile services are expanding in the United States every month.But Tucows is always on the look for a new acquisition.As it has contacts and connections with other Canadian internet services.This blog expects this side of it's business to show growth in 2017.
(c) Assets
Both Tucows and Kinaxis have a similar asset base;both have slightly less than $130 million in assets. But as most investors know the amount of assets are not so important to a software company.More important is the market value of these assets or the market capitalization.Here is where the two differ to a large extent;Tucows has a market capitalization of about $440 million while Kinaxis has a market capitalization of about $1.6 billion or four times the size of Tucows.
Going Forward
Tucows does need greater revenue increases;it is still behind Shopify in this category.And revenue growth was only about 11% in this quarter.A reasonably small tuck-in acquisition would be a good idea at this stage of their development.However their earnings and earnings growth are solid;here they are better than their competitors.As this author has mentioned in other blogs Tucows' float is quite small and less than Kinaxis and Shopify.A small rights offering or a secondary equity offering would be beneficial over the long term.But Tucows' basics are solid and investors should realize that this stock is quite a bargain at these prices; this blog sees it trading in the $50 range by Christmas.All it needs is one more good quarter and it will be there. use Workathon for analysis of internet stocks ;use Workathon for business consulting
