SiteOne Landscape Supply Company Breaks To New Highs
Shares of SiteOne Landscape Supply Company (NYSE: SITE) just set a new all-time high and we are not surprised. The company has been firing on all cylinders and growing at...
Grow Your Portfolio With SiteOne Landscape Supply
Shares of SiteOne Landscape Supply Company (NYSE: SITE) just set a new all-time high and we are not surprised. The company has been firing on all cylinders and growing at a phenomenal pace despite the pandemic and headwinds within the economy. The company’s Q3 report is a testament to that story and one that we see leading the stock even higher. The stock is highly valued trading at nearly 55X its consensus for earnings but you got a lot for your money. The company is aggressively growing, actively working on new acquisitions, and doing so largely on its own dime. There is some debt on the balance sheet but the leverage is so very low we see the company continuing on this trajectory for several more years.
“Our excellent momentum in 2021 continued in the third quarter as our outstanding field and functional teams worked together to overcome select product shortages, trucking challenges, and rapidly rising product costs in order to take advantage of the solid demand for landscaping products and services.
SiteOne Landscape Supply Beats And Raises Guidance
SiteOne Landscape Company had a great 3rd quarter posting $936.4 million in consolidated revenue. The revenue is good for a gain of 24.5% over last year, 45% over 2019, and beat the Marketbeat.com consensus by 310 basis points proving just how strong demand for landscape supplies is. On an organic basis, organic sales are up 15% over last year and compounded by 10% of acquisitional growth. Organic sales, says the company, are up on the combination of volume demand and higher prices, both of which are expected to persist through the end of the current quarter.
Moving down the report, the good news just keeps coming. The company was able to widen its gross margins by 310 points to 36.4% which more than offsets the 70 basis point increase in SG&A. Gross margin is up on higher pricing and cost leverage while SG&A is up on higher variable compensation costs. While we don’t like seeing higher SG&A it’s one thing for the company to waste money and something else to pay performance-related compensation. We like performance and SiteOne Landscape Supply is performing well.
As for guidance, the company didn’t update any revenue targets that we saw but did give a favorable outlook for earnings. The company raised its guidance for EBITDA to a range of $380 million to $400 million compared to the previous high-end of $365.
“Organic sales growth has continued to be strong in October with elevated inflation and favorable market trends across all residential and commercial segments. Our customers are very busy with robust backlogs although they remained constrained by the tight labor market. Given these trends, we now expect organic sales growth to remain healthy through the end of the year,” Doug Black continued.
The Technical Outlook: SiteOne Is In Text-Book Rally Mode
Shares of SiteOne are in classic rally mode and will likely continue moving higher in the mid to long term. Near to short-term, there is a chance price action will pull back from the new all-time high and close the gap/test for support before moving higher. Assuming price action does pull back before moving higher we’d expect to see support kick in at or above the $240 level. If support is able to hold price action up at this level over the next few days, however, the outlook becomes more bullish. In that scenario we see this stock consolidating at this level and then continuing higher. Both the stochastic and MACD are strongly bullish with MACD not only convergent with the new high but showing an Extreme Peak.