Willdan Group, Inc. (WLDN) research, news, and more from GeoInvesting

Company description

Mon, 20 May 2013 04:00:00 GMT

Willdan Group, Inc., together with its subsidiaries, provides professional technical and consulting services to public agencies at various levels of government, public and private utilities, and commercial and industrial firms in the Unites States. The company offers a range of engineering services in the areas of building and safety, city engineering, code enforcement, development plan review and inspection service, disaster recovery, environmental consulting and remediation services, geotechnical and earthquake engineering, landscape architecture, planning, program and construction management, contract staff support, structural engineering, surveying and mapping, traffic engineering and planning, transportation, and water resources. It also provides energy efficiency services, which include energy efficiency, sustainability, and climate action plans; public finance services comprising district administration, financial consulting, and federal compliance; and homeland security services consisting of emergency preparedness planning, training, and exercises, as well as communications and technology, and water security. The company serves public and governmental agencies, including cities, counties, redevelopment agencies, water districts, school districts, and universities; state agencies, federal agencies, and various other special districts and agencies; and tribal governments. Willdan Group, Inc. was founded in 1964 and is headquartered in Anaheim, California.

Research

Thu, 24 Mar 2016 14:54:36 GMT

WLDN ($8.49) - GeoBargain on the radar WLDN has been awarded a one-year, $32.8 million modification from Con Edison to an existing Small Business Direct Install contract (SBDI). It is unclear if this contract is for the full amount, or what the total has reached under the SBDI. We have calls into the company for clarity. If this contract is for the full 32.8 million, it would be what we perceive as a significant contract for the company equating to roughly a quarters worth of revenue.

On March 2, 2016 we stated WLDN was back on our radar due to a recent acquisition, coupled with increasing infrastructure spend by local, state and national agencies has us taking a closer look. Our full research note can beread here. We are happy to see the stock come down slightly from our initial alert of $9.13, as we are looking for an entry point.

Research

Fri, 11 Mar 2016 15:37:28 GMT

WLDN ($9.13) - On March 2, 2016 we stated WLDN was back on our radar due to a recent acquisition, coupled with increasing infrastructure spend by local, state and national agencies has us taking a closer look. Our full research note can be read here. On March 3, 2016 we stated:

We attempted to speak with management on several occasions. Unfortunately we had to settle for the company’s investor relations representative. While we were able to gain more insight on the Company in our talk with IR, we were not able to gain enough clarity on the timeline for the resolution of operational issues that are negatively impacting the near term state of business. We will need to wait for the company’s next earnings report, due next week, to see if management offers any commentary on those issues. However, the long term story continues to seem intact.

WLDN reported fourth quarter 2015results:

Sales of $31.5 million vs $30.2 million in the prior year and below analyst estimates of $33.1 million
EPS of $0.05 vs $0.26 in the prior year and below analyst estimates of $0.08

Quotes from management:

“As we forecasted, our overall results in the fourth quarter were negatively impacted by the performance of our Energy Efficiency Services segment,” said Tom Brisbin, Willdan’s Chief Executive Officer. “Similar to what we experienced in the third quarter of 2015, we had a decline in the scope of activity for our largest utility customer and a long ramp-up phase in one of our new utilities programs. We enter 2016 with a robust pipeline of new opportunities in the Energy Efficiency Services segment, which we believe will help us improve the performance of this business going forward.

As you can see, WLDN’s results continue to be impacted by the poor project executions problems it faced in Q3. However, WLDN offered full year guidance for 2016 above analyst estimates and believes the company will be back on track particularly in the second half of 2016.

WLDN expects full year 2016 revenues to be $170 to $185 million, above analyst estimates of $150.6 million.

Management's Outlook:

“We expect 2016 to be a strong year of profitable growth, particularly the second half of the year. All of our major contracts with utilities have been extended through 2016, which gives us good revenue visibility. We continue to deliver on key milestones in our utilities programs, which is leading to additional program expansion opportunities that we believe will provide incremental revenue in 2016. We are also excited about the addition of Genesys Engineering, our latest acquisition that closed on March 4, 2016. Genesys has exceptional experience in microgrid design, and the addition of their capabilities will improve our ability to capitalize on the growing demand for small-scale independent power grids across the United States.”

We will continue to track the progress as the company works through its execution issues.

In related news, WLDN receives “outperform” rating and $15.00 price target at Wedbush.

Research

Thu, 03 Mar 2016 16:17:10 GMT

Yesterday, we alerted you that WLDN ($8.86) was back on our radar. A recent acquisition, coupled with increasing infrastructure spend by local, state and national agencies has us taking a closer look. Our full research note from yesterday can be read here.

Research

Wed, 02 Mar 2016 13:14:26 GMT

WLDN Back On Our Radar

WLDN ($8.43) provides professional consulting and technical services to utilities, public agencies and private industry throughout the United States. A recent acquisition, coupled with increasing infrastructure spend by local, state and national agencies has once again brought WLDN back onto our radar..

We have been tracking companies that contribute to rebuilding U.S. infrastructure for some time. With respect to WLDN, since 2013. We are kicking ourselves for not pulling the trigger the first time when wehighlighted the company to our members back on May 20, 2013, when the stock was trading at $2.50.

Our original note stated:

WLDN may be a way to play the changing regulatory environment that is causing companies to spend billions of dollars on improving their “energy infrastructure”. For the first time in 3 years, analysts have predicted that the company will enter into a period of sustained EPS growth for several quarters, forecasting EPS of

$0.37 in 2013

$0.43 in 2014

compared to a loss in 2012.

The company went on to report $0.35 in 2013 and $1.09 in 2014.

Even though we may have missed WLDN, we had success in two other names in this industry. $NVEE (best in class), a direct competitor to WLDN, was one of our best performing stocks in 2015.

We first coded NVEE as a GeoBargain on January 29, 2015 when the stock was trading at $11.75. On 2/18/2015, we released a bullisharticle, “NV5 Holdings' Management: Been There, Done That, And Doing It Again”. The stock was trading at $12.95 at the time of publishing. The stock reached a high of $28.07 July 6, 2015 and now trades near $22. We alerted you that we were looking to re-initiate a long position in NVEE on February 9, 2016 at $19.00 and sharedour interview we had with the company’s CEO & Chairman.

Another stock in the industry that had a strong run for us was $TRR. Weestablished our position in TRR on 2/24/2015 at $7.75. The stock quickly ran to near $11.50 (where we began selling shares) roughly 4 months after we established our position. Weclosed out our entire long in early September at around $9.

It looks like we may have another chance to capture some returns in WLDN if the outcome of our due diligence continues to support a bullish thesis. Since reporting strong growth in 2014, the stock has fallen from its highs of $16.26 on the heels of the company reporting three consecutive quarters of weak growth. Here is a quote from the company's Q3 2015earnings report where it revealed some current challenges:

“our Energy Efficiency Services segment revenue and income were below our expectations for the quarter. The weakness in Energy Efficiency was the result of poor project execution, and was not caused by slower customer spending or demand for our services. While these operational issues are being addressed, we anticipate that the poor project execution will have a residual impact in the fourth quarter. Notwithstanding the execution issues on a few programs, we continue to have a steady stream of new contract wins and we have a solid pipeline of work to drive growth and profitability in 2016.”

The stock is selling at an attractive valuation compared to its competitors.

WLDN Competitor Valuations

	ACM	JEC	NVEE	TRR	WLDN
PE (ttm)	n/a	19.77	20.64	10.49	11.41
Price/Sales	0.23	0.40	1.26	0.48	0.46
EV/Sales	0.45	0.42	1.21	0.73	0.39
EV/EBITDA	8.16	8.82	10.70	7.21	4.75

If the company can re-establish its growth trend we think shares should rise to reflect valuations closer to its peers. We will continue our DD, but for now here our reasons for tracking WLDN:

Similar to Ex-GeoBargain and current long NVEE, WLDN is benefiting from increased focus on infrastructure spending by the government. In particular to the areas WLDN services are highlighted in its10-k filings:

“Engineering and planning services encompass a variety of disciplines associated with the design and construction of public infrastructure improvements. We expect continued population growth in California and other western states to place a significant strain on the infrastructure in those areas, driving the need for both new infrastructure and the rehabilitation of aging structures. Federal, state and local governments have responded to this need by proposing an increase in their funding of infrastructure related activities, and voters in California and Arizona have, in recent years, passed sales tax increases to fund transportation improvements.”

The company justannounced that it expects to soon close an acquisition of New York based power engineering company Genesys Engineering. Genesys had approximately $30 million in revenue for 2015. WLDN expects the deal to be accretive to 2016 earnings. No pro-forma data has been released yet, but using WLDN net margins of 3.7%, it seems that the acquisition can add roughly $0.13 to EPS for 2016.
Current analyst EPS estimates for 2016 are $0.75, up from an estimated $0.56 in 2015 (not factoring any contribution from Genesys acquisition.)
Applying a forward multiple of 15X on current analyst estimates of $0.75 would equate to a price target of $11.25. If we assume the company can generate $0.10 from the Genesys acquisition (expects acquisition to close in early March, so roughly 10 month’s contribution) applying the same forward multiple of 15 would equate to a price target of $12.75 or 50% upside from current prices.
The company’s largest segment, Energy Efficiency, may have been unfairly associated with the decline in oil prices. However, according to management, demand in this segment has only been increasing. Looking at last 10-Q and Q3 press release:

“Contract revenue in our Energy Efficiency Services segment increased $4.3 million, or 31.4%, to $17.8 million for the three months ended October 2, 2015 as compared to $13.6 million for the three months ended September 26, 2014.

...we continue to have a steady stream of new contract wins and we have a solid pipeline of work to drive growth and profitability in 2016.”

Caveats:

The stock was hammered after reporting poor Q3 2015 results, missing both top and bottom line analyst estimates. Company stated its Energy efficiency segment suffered from poor project execution, which it expects to carry over into Q4 2015. The company does state that demand is there and that they continue to win contracts in this segment.
The company's earnings will probably suffer through Q1 2016

Reasons For Tracking

Wed, 02 Mar 2016 05:00:00 GMT

WLDN Back On Our Radar

Our original note stated:

WLDN may be a way to play the changing regulatory environment that is causing companies to spend billions of dollars on improving their “energy infrastructure”. For the first time in 3 years, analysts have predicted that the company will enter into a period of sustained EPS growth for several quarters, forecasting EPS of

$0.37 in 2013

$0.43 in 2014

compared to a loss in 2012.

The company went on to report $0.35 in 2013 and $1.09 in 2014.

Even though we may have missed WLDN, we had success in two other names in this industry. $NVEE (best in class), a direct competitor to WLDN, was one of our best performing stocks in 2015.

“our Energy Efficiency Services segment revenue and income were below our expectations for the quarter. The weakness in Energy Efficiency was the result of poor project execution, and was not caused by slower customer spending or demand for our services. While these operational issues are being addressed, we anticipate that the poor project execution will have a residual impact in the fourth quarter. Notwithstanding the execution issues on a few programs, we continue to have a steady stream of new contract wins and we have a solid pipeline of work to drive growth and profitability in 2016.”

The stock is selling at an attractive valuation compared to its competitors.

WLDN Competitor Valuations

	ACM	JEC	NVEE	TRR	WLDN
PE (ttm)	n/a	19.77	20.64	10.49	11.41
Price/Sales	0.23	0.40	1.26	0.48	0.46
EV/Sales	0.45	0.42	1.21	0.73	0.39
EV/EBITDA	8.16	8.82	10.70	7.21	4.75

If the company can re-establish its growth trend we think shares should rise to reflect valuations closer to its peers. We will continue our DD, but for now here our reasons for tracking WLDN:

Similar to Ex-GeoBargain and current long NVEE, WLDN is benefiting from increased focus on infrastructure spending by the government. In particular to the areas WLDN services are highlighted in its10-k filings:

“Engineering and planning services encompass a variety of disciplines associated with the design and construction of public infrastructure improvements. We expect continued population growth in California and other western states to place a significant strain on the infrastructure in those areas, driving the need for both new infrastructure and the rehabilitation of aging structures. Federal, state and local governments have responded to this need by proposing an increase in their funding of infrastructure related activities, and voters in California and Arizona have, in recent years, passed sales tax increases to fund transportation improvements.”

The company justannounced that it expects to soon close an acquisition of New York based power engineering company Genesys Engineering. Genesys had approximately $30 million in revenue for 2015. WLDN expects the deal to be accretive to 2016 earnings. No pro-forma data has been released yet, but using WLDN net margins of 3.7%, it seems that the acquisition can add roughly $0.13 to EPS for 2016.
Current analyst EPS estimates for 2016 are $0.75, up from an estimated $0.56 in 2015 (not factoring any contribution from Genesys acquisition.)
Applying a forward multiple of 15X on current analyst estimates of $0.75 would equate to a price target of $11.25. If we assume the company can generate $0.10 from the Genesys acquisition (expects acquisition to close in early March, so roughly 10 month’s contribution) applying the same forward multiple of 15 would equate to a price target of $12.75 or 50% upside from current prices.
The company’s largest segment, Energy Efficiency, may have been unfairly associated with the decline in oil prices. However, according to management, demand in this segment has only been increasing. Looking at last 10-Q and Q3 press release:

“Contract revenue in our Energy Efficiency Services segment increased $4.3 million, or 31.4%, to $17.8 million for the three months ended October 2, 2015 as compared to $13.6 million for the three months ended September 26, 2014.

...we continue to have a steady stream of new contract wins and we have a solid pipeline of work to drive growth and profitability in 2016.”

Caveats:

The stock was hammered after reporting poor Q3 2015 results, missing both top and bottom line analyst estimates. Company stated its Energy efficiency segment suffered from poor project execution, which it expects to carry over into Q4 2015. The company does state that demand is there and that they continue to win contracts in this segment.
The company's earnings will probably suffer through Q1 2016

Research

Mon, 20 May 2013 04:00:00 GMT

Willdan Group, Inc. (NASDAQ:WLDN) ($2.51) provides a broad range of services to public agencies at all levels of government, public, and private utilities, as well as commercial and industrial firms throughout the United States, including engineering and planning, energy efficiency and sustainability, economic and financial consulting, and national preparedness and interoperability. WLDN may be a way to play the changing regulatory environment that is causing companies to spend billions of dollars on improving their “energy infrastructure”. For the first time in 3 years, analysts have predicted that the company will enter into a period of sustained EPS growth for several quarters, forecasting EPS of

$0.37 in 2013
$0.43 in 2014
compared to a loss in 2012.

Margins, however, are tiny.