Street Calls of the Week
Tuesday, Transcat Inc. (NASDAQ:TRNS), a $923 million market cap company, received a reiterated Buy rating and a $126.00 price target from H.C. Wainwright, despite reporting third-quarter fiscal year 2025 revenues and adjusted EBITDA that fell below analyst and market expectations. The financial results, released after market close on Monday, showed that the company's revenue reached $66.8M, affected in part by the timing of the Christmas holiday. InvestingPro data reveals the company maintains strong financial health with a robust current ratio of 3.59, though the stock has declined nearly 30% over the past six months.
According to H.C. Wainwright's analysis, the holiday season led to atypical lower staffing levels or even closed customer facilities at the end of the quarter, which usually sees an acceleration of activity. Transcat Solutions, previously known as Nexa, also reported softer performance compared to the previous year, although it was in line with management's projections. Despite recent challenges, InvestingPro analysis shows the company has maintained an impressive revenue growth rate of 11.42% over the last twelve months. Subscribers can access 15+ additional ProTips and comprehensive financial metrics in the Pro Research Report.
Despite the underwhelming financial performance in the third quarter, H.C. Wainwright pointed to positive indicators for Transcat's future. The firm highlighted stronger activity levels in January, a robust organic pipeline, and the recent acquisition of Martin Calibration Inc. as reasons for optimism. Consequently, management anticipates a rebound to historic organic growth rates in upcoming quarters.
The report did caution that Transcat's stock is expected to open lower in Tuesday's trading session. H.C. Wainwright's current model and outlook for the company are awaiting further details from the earnings conference call. The firm's long-term positive view on Transcat is based on the belief that the company has the credibility to navigate the current challenges successfully.
In other recent news, Transcat, Inc. has reported an 8% increase in consolidated revenue, totaling $67.8 million for the second quarter of fiscal 2025. The growth was largely driven by strong demand in calibration services and the rental business, resulting in a significant rise in net income to $3.3 million. However, the company faced challenges with its NEXA cost control services, contributing to a 5% decrease in adjusted EBITDA. Excluding NEXA, organic service growth remained strong at 9%.
Transcat has also entered into severance agreements with three of its top executives, ensuring leadership stability in the event of significant corporate transactions such as mergers or acquisitions. The company's recent acquisition of Martin Calibration is expected to enhance its scale and service capabilities, with Craig-Hallum upgrading Transcat's price target from $113.00 to $125.00 in response to the acquisition's potential to boost profitability.
In light of these developments, Transcat plans to address NEXA's performance issues and anticipates mid-single-digit organic service revenue growth for fiscal 2025. The company also maintains a focus on mergers and acquisitions to expand capabilities and market reach. These are the latest key developments in Transcat's ongoing efforts to improve operational efficiencies and capitalize on market opportunities.
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