Federal Signal (FSS) Tops Q2 EPS by 10c, Revenues Beat; Reinstates FY20 EPS Guidance Above Consensus

Federal Signal (NYSE: FSS) reported Q2 EPS of $0.41, $0.10 better than the analyst estimate of $0.31. Revenue for the quarter came in at $270 million versus the consensus estimate of $264.33 million.

Second Quarter Highlights

• Net sales of $270 million, with double-digit sequential improvement in average weekly sales in both May and June
• Operating margin of 11.6%
• Adjusted EBITDA margin of 16.8%, exceeding high end of target range
• GAAP EPS of $0.35
• Adjusted EPS of $0.42
• Generated operating cash flow of $60 million, a 73% improvement from last year; further strengthened financial position, with $74 million of cash and $245 million of credit facility availability at end of quarter
• Reinstates full-year guidance, with adjusted EPS* for 2020 expected to be within a range of $1.53 to $1.65

Despite Significant Challenges, Q2 Operational Performance Impressive, with Margins Exceeding Target Ranges

"I could not be prouder of our performance during the quarter. Our teams demonstrated impressive operational execution in exceptionally difficult circumstances, while at the same time continuing to provide a safe working environment for our employees," commented Jennifer L. Sherman, President and Chief Executive Officer. "At the beginning of the quarter, we reacted quickly and decisively in response to a variety of operational challenges resulting from the pandemic by adjusting our operating costs and modifying our production schedules. As our teams developed strategies to operate in the new COVID environment, we experienced double-digit sequential improvement in average weekly sales in both May and June. The combination of these factors helped us to maintain a high level of performance and deliver an adjusted EBITDA margin of 16.8% in the quarter, exceeding the upper end of our target range."

GUIDANCE:

Federal Signal sees FY2020 EPS of $1.53-$1.65. Federal Signal sees FY2020 revenue of $1.44 million.

• Improved Cash Flow Further Strengthens Financial Position, Facilitates M&A and Cash Returns to Stockholders
• Net cash of $60 million was provided by operating activities during the second quarter, up $25 million, or 73%, compared to the prior-year quarter.
• At June 30, 2020, consolidated debt was $245 million, total cash and cash equivalents were $74 million and the Company had $245 million of availability for borrowings under its five-year revolving credit facility, which was executed in July 2019.

"Early in the quarter, we took a series of actions to reduce our costs and preserve liquidity in the short-term. Those measures contributed to a record level of operating cash flow generation," said Sherman. "During the quarter, we paid down approximately $36 million of debt, completed an acquisition, and funded cash returns to stockholders. We are continuing to approach the uncertainty and challenges with resolve and from a position of strength given our current financial position, which has improved further since the end of the first quarter, and we remain committed to pursuing further strategic acquisitions, investing in organic growth opportunities and returning value to our stockholders."

• The Company funded dividends of $4.9 million during the second quarter, reflecting a dividend of $0.08 per share, and the Board of Directors recently declared a similar dividend that will be payable in the third quarter.

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

You May Also Be Interested In

• Tesla plans 'flying' Roadster stunt at SpaceX Texas site as early as August
• Movano (MOVE) Misses Q2 EPS by 195c
• Newton Golf Company (NWTG) Reports Q2 Loss of $0.49