Chart of the Week
The Viridian Capital Chart of the Week highlights key investment, valuation and M&A trends taken from that week’s Deal Tracker that we believe are impactful for investors, companies and acquirers.
Viridian Capital Chart of the Week: DO ANALYST’S Q2 ESTIMATES REVEAL AN EXPECTATION OF A SLOWDOWN?
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- Viridian’s Chart of the Week previews the upcoming Q2 earnings releases that begin in the first week of August. We wanted to have an early look before the company nudging of analysts “corrects” the estimates. The table below shows consensus estimates of Q2: 2024 revenues and EBITDA for 14 MSOs in order of release date. Revenues for Q1:24 and Q2:23 are presented for comparison purposes.
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- The graph shows the calculated percentage growth rates of EBITDA, arranged in increasing order of sequential quarterly growth rates (orange bars.) The blue bars show year-over-year growth rates, and the green bars show estimated full-year 2024 EBITDA vs actual 2023 EBITDA.
- Half of the companies on the chart have projected negative sequential growth in EBITDA for Q2: 24. This is surprising because Q2 is generally a seasonally stronger quarter, and in the previous three years, an average of nearly 80% of the companies on the chart have had higher EBITDA in Q2 compared to Q1.
- Analysts are projecting a 10.2% y/o/y EBITDA growth for Q2 and full-year 2024 EBITDA growth of 9.8% compared to 2023. However, 1st half of 2024 results, including the Q2 estimates, are 14.2% higher than the 1st half of 2023, implying that second-half growth will only be around 6.0%. Are analysts expecting dramatic slowing, or have they just not updated their 2024 estimates?
- Anecdotally, IR spokesmen for several companies have spoken of tightening consumer spending, price declines in New Jersey and other markets, and a generally competitive retail environment.
- While we don’t challenge the idea of a consumer slowdown, we continue to believe sell-side analysts are being slow to adjust earnings estimates upward, and the impact of Ohio in the second half seems underappreciated.
