Softer outlook
Investment implications
FY22 Result: Result slightly ahead of the market, driven by the lower tax rate. Operating cash flow missed (working capital). Overall, we call the result in-line. No formal earnings guidance was given. Ongoing price increases are not expected to offset margin pressure. RWC didn’t indicate whether they believe they can generate margin expansion for FY23.
Result Details: Group EBITDA US$269m vs US$265m market. EBITDA margin solidly in the mid-20% range. NPAT US$161m vs US$152m market. EPS US$0.21 vs US$0.19. DPS US$0.10 in-line
Outlook: Outlook commentary suggests a tougher market in the US vs expectations. Price rises in FY23 are unlikely to offset cost pressures, with RWC flagging the potential for softer margins in the US.
Supply chain improvements and strength in professional demand are driving a destocking event as retailers reduce their “safety stock” resulting in a near-term impact on volumes.
Summary: Is this as good as it gets for RWC, given the boost of the strong US housing market over FY22? That is certainly the initial view from the market, with softer outlook comments weighing on what we call an in-line result.
The market is looking for mid-single EPSg growth in FY23E, with higher earnings margins. It is likely the market will need to downgrade FY23E numbers by mid-single numbers post this result.
This commentary reflects our initial view. For detailed reports for companies under Sandstone Insights coverage, see our latest research notes for our investment view and specific risks associated with investing in these companies.
Figure 1: RWC Adjusted EBITDA breakdown.
Stock overview
Share Price
Company overview
Reliance Worldwide Corporation designs, manufactures and supplies water flow and control products and solutions.
Disclaimers and Disclosures
Issuer
The information and opinions contained within Sandstone Insights Research were prepared by MST Financial Services Pty Ltd (ABN 54 617 475 180, AFSL 500557) ("MST").
Reliance
Whilst MST make every effort to use reliable, comprehensive information in the construction of its reports, MST make no representation, warranty or undertaking of the accuracy, timeliness or completeness of information in this report. Save for any statutory liability that cannot be excluded, MST and MST employees, representative and agents shall not be liable (whether in negligence or otherwise) for any error or inaccuracy in, or omission from, this advice or any resulting loss suffered by the recipient or any other person.
General Advice
Any advice contained within Sandstone Insights Research is general advice only and has been prepared without taking into account any person’s objectives, financial situation or needs. Any person, before acting on any advice contained within Sandstone Insights Research, should first consider consulting with a financial adviser to assess whether that advice is appropriate for their objectives, financial situation and needs.
General Disclosures
This report should be read in conjunction with MST Disclaimers and Disclosures and is published in accordance with MST Conflict Management Policy which are available on the MST website: https://www.sandstoneinsights.com.au.
Currency of Research
The recommendations made in a Sandstone Insights Research report are current as of the publication date. If you are reading a report materially after publication, it is likely that circumstances will have changed and at least some aspects of the analysis may no longer hold.
Access and Use
Any access to or use of Sandstone Insights Research is subject to the Terms of Use. By accessing or using Sandstone Insights Research you hereby agree to be bound by our Terms and Conditions and hereby liable for any monies due in payment of accessing this service. In addition you consent to us collecting and using your personal data (including cookies) in accordance with MST Privacy Policy, including for the purpose of a) setting your preferences and b) collecting readership data so MST may deliver an improved and personalised service to you. If you do not agree to MST Terms of Use and/or if you do not wish to consent to MST use of your personal data, please do not access this service.
Equities Research Methodology
Please click here for information about MST equities research methodology.
Related Reports
Blue sky flying
Alliance Aviation reported a step change in FY23 earnings due to its significantly expanded fleet aligned to wet leases to Qantas. The ACCC rejected QAN’s takeover proposal in April 2023.
Alan has left the building
Qantas CEO Alan Joyce is not going out with the sort of bang he envisaged after 22 years with the airline and 15 years as CEO.
More haste, less waste
FY23 result. In-line with consensus at the EBIT line, but higher interest cost weighed on net profit to be just 2% ahead of last year.