Brink’s Company (NYSE: BCO) stock surged over 11% on Jan 11th, 2018 leading to a total rise of over 29.1% in the last six months. Upgrade by Sidoti from Neutral to Buy drove the stock sentiment, who issued a price target of $98.
The group bought Brazil-based Rodoban for over $145 million in cash with the acquisition, expected to close in the second quarter of 2018. Rodoban offers cash-in-transit, money processing and ATM services primarily to customers in southeastern Brazil. The firm generates an annual revenue of over $80 million. This transaction is forecasted to be accretive to net income within 12 months. While the group intends to invest over $400 million per year to acquire similar businesses in 2018 and 2019.
With this deal, the group would expand their service reach, improve route density and yield other significant cost synergies. Rodoban would be the seventh acquisition for Brink’s since March 2017 and in 2019, these acquisitions are forecasted to generate total adjusted EBITDA of over $90 million.
For the third quarter of 2017, the group’s profits in North America were enhanced 90% and revenue rose 7% boosted by strong quarter in Mexico where organic revenue growth continued to be double-digits and operating margin more than doubled from 5% last year.
Operating margin enhanced 60 basis points to 9.2% while adjusted EBITDA margin rose 80 basis points to 13.5%. Third quarter EPS surged 22% yoy to $0.83 per share. Operating margins through the nine months year-to-date, enhanced 180 basis points to 8.2%, while adjusted EBITDA margin rose 190 basis points.
The group’s U.S. breakthrough cost improvement initiatives are on track to meet their 2019 profit targets. With this year-to-date margin approaching 10%, Mexico is on target of 10% margin for 2017. The group is targeting at least 15% margin by 2019.
The stock more than doubled since the last one generating over 108.6% (as of Jan 11th, 2018; Source: Company reports). The stock is trading at a high P/E of 53.7x