Key Points
One high point was management's increase in revenue guidance.
It cut its forecast for adjusted EBITDA, however.
BrightView Holdings (NYSE: BV) stock got smacked with an investor sell-off on Tuesday. The catalyst was the company's fiscal third-quarter results, which, despite a guidance raise for a key line item, missed analyst estimates for both revenue and profitability.
Two metrics, two different trajectories
BrightView, which specializes in professional landscaping services, posted revenue of $717.6 million, representing slightly over 1% year-over-year growth. The company's net profit not in accordance with generally accepted accounting principles (non-GAAP, or adjusted) went sharply in the other direction, falling by 44% to $25.4 million ($0.17 per share).
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That meant a double miss on the analyst estimates for BrightView, as the pundit consensus for revenue was $726 million, while that for adjusted net profit was $0.29 per share.
In its earnings release, BrightView said that the quarter was impacted by an increase in reserves to cover legacy insurance costs and increased fuel prices for its vehicle fleet.
Despite these headwinds, it sounded an optimistic note on its future. It quoted CEO Dale Asplund as saying that "Our continued focus on prioritizing our front-line employees and customers, expanding our salesforce, and commitment to operational excellence continue to strengthen our business and positions us to deliver sustainable growth over the near and long term."
A raise and a cut
Backing up this point, BrightView raised its revenue guidance. It now anticipates revenue of $2.75 billion to $2.78 billion, up from the prior forecast of $2.67 billion to $2.73 billion.
That's the good news. The bad news is that it cut guidance for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to $340 million to $345 million, from $363 million to $377 million.
BrightView's top-line growth wasn't inspiring, nor was that steep decline in profitability, no matter the factors behind it. I feel investors were right to sell out of the company, and I'm not convinced we've seen a bottom with the stock yet.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.