Alta Equipment Group (NYSE:ALTG) Q4 Sales Beat Estimates: Is Now the Time to Invest?

The recent Q4 earnings report from Alta Equipment Group (NYSE:ALTG) has left investors wondering if now is the time to buy into the company. With revenue beating Wall Street's expectations, but sales falling by 4.5% year on year to $498.1 million, the picture is mixed. In this article, we will delve into the details of the report, exploring the company's revenue dynamics, operating margin, and earnings per share (EPS) to provide a clearer understanding of Alta's current situation and future prospects.

Alta's revenue fell by 4.5% year on year to $498.1 million, but beat Wall Street's estimates by 3.6%. This decline is largely attributed to the company's Equipment and Parts segments, which account for 57.6% and 13.6% of revenue, respectively. Over the last two years, Alta's Equipment revenue averaged 3.7% year-on-year declines, while its Parts revenue averaged 1.7% declines. Despite this, the company's 27.5% annualized revenue growth over the last five years is impressive, outpacing the average industrials company.

Alta's operating margin has been a concern, with an average of 1.7% over the last five years, which is weak for an industrials business. However, the company's operating margin rose by 1.9 percentage points over the last five years, driven by sales growth. In Q4, Alta's breakeven margin was down 1.9 percentage points year on year, primarily due to weaker leverage on its cost of sales. The company's EPS has also been declining, with a 41.4% annual drop over the last four years. This decline is a concern, as it may indicate changing secular trends and preferences.

Looking ahead, sell-side analysts expect revenue to grow 2.2% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates that Alta's products and services will face some demand challenges. However, the company's full-year EBITDA guidance exceeded Wall Street's estimates, providing a positive note. With a market capitalization of $158.3 million, Alta Equipment Group is a company that warrants close attention. While the recent Q4 earnings report presents a mixed picture, the company's long-term growth prospects and valuation are crucial factors to consider when deciding whether to invest. For a more in-depth analysis, including actionable insights and recommendations, readers can access our full research report, available for free.