VSE Corporation VSEC reported mixed fourth-quarter 2023 results, wherein its earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Both the top and bottom lines increased year over year.
The quarterly results reflect strong contributions from the Aviation and Fleet segments. The uptrend was backed by strong program execution, expansion of the distribution product lines and repair capabilities, along with contributions from recent acquisitions. Also, growth trends in commercial sales and robust contributions from legacy customers bode well.
Looking forward to 2024, VSEC expects to leverage on the new investments in newly awarded contracts, and the integration and launch of the recently acquired businesses. Also, the lately announced acquisition of Turbine Controls, Inc. is expected to add to the uptrend.
Inside the Headlines
VSE reported adjusted earnings per share (EPS) of 85 cents, which surpassed the consensus estimate of 76 cents by 11.8%. In the year-ago quarter, the company reported EPS of 68 cents.
VSE Corporation Price, Consensus and EPS Surprise
VSE Corporation Price, Consensus and EPS Surprise
VSE Corporation price-consensus-eps-surprise-chart | VSE Corporation Quote
Quarterly revenues of $235.3 million missed the consensus mark of $235.6 million by 0.1%. However, the reported figure increased 36.8% from the year-ago level of $172 million.
Operating margin of 10.8% was up 150 basis points (bps) from 9.3% in the year-ago quarter. Adjusted EBITDA for the reported period increased 45.7% from the prior-year period to $31.4 million.
Segmental Discussion
Aviation: This segment’s revenues increased 43.4% year over year to $153.7 million in the fourth quarter. Operating income increased 52.3% to $18.8 million from $12.3 million in the year-ago period. Adjusted EBITDA for the quarter grew 51.9% year over year to $23.9 million. The uptrend was driven by strong execution of distribution programs, maintenance, repair and overhaul market share gains, improved pricing and product mix, increased operating leverage and contributions from the Desser Aerospace acquisition.
Fleet: Revenues from this segment increased 25.9% year over year to $81.6 million. Operating income increased 59.5% year over year to $9 million. Adjusted EBITDA for the quarter grew 24.1% year over year to $9.8 million. The uptick was attributable to favorable customer and product mix.
Financial Details
As of Dec 31, 2023, cash and unused commitment availability under its $350 million revolving credit facility maturing in 2026 totaled $216 million compared with $160 million at the end of 2022. Total net debt was $422 million as of 2023 end, up from $286 million at the end of 2022. Net cash used in operations was $21.8 million for 2023 against net cash from operation of $8.1 million for 2022.
2023 Highlights
For the year, VSE reported revenues of $860.5 million, up 28.5% from the 2022 level. Adjusted EPS of $3.31 increased 44.5% from $2.29 a year ago.
Operating margin of 10.2% expanded 200 bps year over year. Adjusted EBITDA of $113.8 million was up 45.5% from the 2022 level of $78.2 million.
2024 Guidance
For 2024, the company expects the Aviation segment’s revenues to grow between 24% and 28% year over year. Adjusted EBITDA margin is expected to be between 15% and 16%.
For the year, revenues in the Fleet segment are expected to grow 13-17% year over year. Adjusted EBITDA is expected to increase 8-12% from the prior-year level.
Zacks Rank & Recent Construction Releases
VSE currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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