CIBC Lowers Boyd Group Services' Price Target to C$205.00 From C$275.00
CIBC Capital Markets maintained its outperformer rating on the shares of Boyd Group Services (BYD.TO) and reduced its price target to C$205.00 from C$275.00 after the company reported its first quarter results.While "absolute earnings from BYD were solid", the miss on SSSG (same-store sales growth) relative to expectations resulted in the stock stepping down nearly 12%, CIBC said in the note.With two consecutive quarters of SSSG coming in below expectations, CIBC believes the "market is calling into question near-term and medium-term visibility on the name," it said.While this was the second consecutive quarter with SSSG below Street expectations, the underlying drivers of the business continue to move in the right direction, stated CIBC, adding that claims volumes have largely normalized (0%-2% decline in Q1), bringing the volume environment back in line with historical levels, and insurance premiums growth continues to moderate, it added."From here, we will need to see improvement in the total cost of repair to help drive SSSG into BYD's targeted range of 3% - 5%," said CIBC. "At a high level, we would characterize the current environment as one where the underlying industry recovery is progressing but at a slower pace than initially expected, rather than one where conditions have worsened."CIBC noted, Q1 growth was primarily driven by acquisitions and new locations, contributing ~$204MM of incremental revenue, including the addition of JHCC. At the same time, BYD delivered "strong margin expansion," with adjusted EBITDA margins improving ~200bps Y/Y, supported by cost savings initiatives and early synergy realization."Taken together, we think this reinforces that execution across the business remains solid," stated CIBC. "The gap relative to expectations is largely a function of the pace at which industry tailwinds are translating into reported organic growth, rather than any change in underlying competitive positioning or operating performance."CIBC further noted that management reiterated that capital allocation will remain focused on M&A and greenfield expansion, and share buybacks "did not sound as if they are a near-term priority". While this strategy is consistent with BYD's historical approach, the sharp share price reaction brings increased attention to capital deployment, further added CIBC."With the shares down ~38% YTD, the relative attractiveness of buybacks has improved, and we would expect there to be a stronger consideration for share buybacks in the near term," said CIBC in the May 13 note.CIBC adjusted its estimates to reflect lower SSS expectations in 2026 and 2027, and has lowered its price target multiple from 12.0x to 10.0x."The 10.0x forward EBITDA multiple is at the lower end of where BYD has historically traded and is our attempt to handicap the near-term lack of visibility on the timing of the recovery in the industry," added CIBC. "With that said, we maintain our Outperformer rating and our price target moves from C$275 to C$205 reflecting a ~52% return to target."Price: $140.01, Change: $+5.47, Percent Change: +4.07%