Analysis JBTM
JBT Marel trimmed its sales outlook. Why expand buybacks by $500 million?
Quarterly free cash flow improved, but repurchases were larger. The revised annual forecast raises adjusted earnings per share while leaving the adjusted EBITDA midpoint almost unchanged.
JBT Marel lowered its annual sales outlook and gave itself another $500 million of share-buying capacity.
The food-processing equipment maker points to better margins, stronger cash generation and the opportunity to buy shares below its view of long-term value. The sales reduction is modest: about 1.3% at the forecast midpoint. Its annual adjusted EBITDA forecast is almost unchanged at the midpoint. That measure removes interest, taxes, depreciation, amortization and selected other items.
The board approved the increase on October 30. Total lifetime authority is now $700 million, including approximately $120 million already spent through September.
What the latest cash funded
Research by Ticker Byline shows that third-quarter free cash flow rose to $73 million from $57 million a year earlier. Operating cash flow rose to $99 million from $87 million.
The company spent $94 million buying shares in the quarter, exceeding that free cash flow by $21 million. Net debt rose $10 million from June to $1.596 billion. Currency-hedge settlement proceeds also supplied cash during the quarter.
Debt was still below year-end, and net debt was 2.45 times adjusted EBITDA for the past 12 months, compared with 2.47 times in June. Management expects future purchases to fit its long-term leverage range of 2.0–2.5 times.
The sales trim leaves the profit midpoint almost intact
| Measure | August | November |
|---|---|---|
| Revenue | $3,990–$4,065 | $3,950–$4,000 |
| Adjusted EBITDA | $675–$710 | $681–$700 |
| Adjusted diluted EPS | $7.85–$8.35 | $8.10–$8.40 |
| GAAP diluted EPS | $4.20–$4.70 | $4.30–$4.60 |
Management attributes the higher adjusted EPS midpoint to lower interest, taxes and share count. The GAAP EPS midpoint is unchanged.
The revenue weakness is concentrated in quick-turn orders from consumer packaged goods customers. Orders across the company rose to $976 million from $946 million a year earlier. Backlog of $1.516 billion was higher than the year-earlier $1.339 billion, but below June's $1.536 billion.
Quarterly adjusted EBITDA reached $179 million at a record 18% margin, helped by cost synergies and mix. GAAP operating income was slightly lower. The JBT Marel company profile tracks how cash, debt and the expanded buyback authority develop from here.