FBR Capital Raises price Target on Spark Energy (SPKE) to $33 Following Strong 2Q
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FBR Capital reiterated an Outperform rating on Spark Energy (NASDAQ: SPKE), and raised the price target to $33.00 (from $32.00), following the company's 2Q earnings report. SPKE raised 2016 guidance from a range of $44M-$48M to $75M-$82M, with ~25% of the improvement from organic growth and the remainder from the two acquisitions.
Analyst Carter Driscoll commented, "On August 10, SPKE reported strong 2Q16 results, delivering $11.5M in adjusted EBITDA, after preannouncing a range of $10M to $12M on July 20. The 15.1% adjusted EBITDA margin was almost double YOY driven by higher volumes, better attrition rates, and an improved natural gas margin. The natural gas unit gross margin was $4.56, up over 10% YOY, with deft hedging helping to drive the outperformance. More importantly, SPKE announced two acquisitions, paid for largely by issuing ~2.7M shares at $20/share (~$54M) and ~$14M in debt (before earn-outs, assumed liabilities, etc.). SPKE expects the acquisitions to generate EBITDA at an annualized $30M run-rate before cost savings, adding 330,000 residential customer equivalents (RCE) and new territories. Furthermore, SPKE raised 2016 guidance from a range of $44M to $48M to $75M to $82M, with ~25% of the improvement from organic growth and the remainder from the two acquisitions. The company continues to evaluate new acquisition opportunities and commented that the normal competitive bidders largely remain absent. We remain buyers of the shares."
Shares of Spark Energy closed at $28.10 yesterday.
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