Federal Signal (FSS) Tops Q1 EPS by 6c, Revenues Miss; Withdraws FY20 EPS Outlook

Federal Signal (NYSE: FSS) reported Q1 EPS of $0.39, $0.06 better than the analyst estimate of $0.33. Revenue for the quarter came in at $286 million versus the consensus estimate of $299.78 million.

• Net sales of $286 million, up $12 million, or 4%, from last year
• Operating income of $32.3 million, up $6.5 million, or 25%, from last year
• GAAP EPS of $0.38, up $0.09, or 31%, from last year
• Adjusted EPS of $0.39, up $0.09, or 30%, from last year
• Orders of $304 million, up $5 million, or 2%, from last year
• Record backlog of $401 million, up $37 million, or 10%, from last year
• Operating cash flow of $5.2 million, up $14.0 million from last year
• Cash and cash equivalents of $69 million, and $211 million of availability under revolving credit facility

"Our first-quarter results represent a strong start to the year, and our teams did a tremendous job in delivering year-over-year improvement in exceptionally difficult circumstances," commented Jennifer L. Sherman, President and Chief Executive Officer. "On a consolidated basis, our net sales were up 4% compared to last year, and our operating income improved by 25%. Our adjusted EBITDA margin for the first quarter was 15.3%, towards the high end of our target range and up 220 basis points from last year. We also reported a 2% improvement in orders, contributing to a record backlog at the end of the quarter."

COVID-19 Update and Outlook

"Our businesses are considered to be essential in supporting critical infrastructure needs and public safety. While certain of our operations have been affected by temporary facility closures, either due to government-issued mandates or other concerns related to COVID-19, our facilities have so far remained substantially operational during the pandemic. Given that, our primary focus has been on the safety and wellbeing of our employees," noted Sherman.

"We were proactive in implementing enhanced health and safety measures across the organization, establishing remote working arrangements, where possible, and increasing the frequency of communications to reinforce health and safety guidelines. We also modified our employee attendance policies and provided employees with additional paid time off in order to encourage those who were sick, had health concerns, or were otherwise adversely impacted by the pandemic, to remain at home.

As a result of the combination of these factors and the enactment of the Coronavirus Aid, Relief, and Economic Security Act, in recent weeks we have experienced a decrease in labor availability at several of our facilities. This has resulted in a variety of challenges in running our operations efficiently, which has adversely affected productivity levels. We are also seeing similar issues within our supply chain, with certain suppliers temporarily shut down. In addition, certain customers are unable to take delivery of equipment given the limited personnel that they currently have available. Although these factors had a limited impact on our first-quarter results, we are expecting a more significant impact in the second quarter as we adjust our production schedules accordingly.

The overall magnitude of the impact of the pandemic on our current-year results remains uncertain, and will largely depend on the duration of the pandemic and the measures implemented in response, as well as the effect on our customers. Given these factors, we are unable to reliably forecast the effect that the pandemic will have on our financial results. As a result, we are withdrawing our previously-issued adjusted EPS* outlook for 2020. Our intent is to provide a further update on our second-quarter earnings call."

For earnings history and earnings-related data on Federal Signal (FSS) click here.

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