On Friday, August 2, IES Holdings, which designs and installs integrated electrical and technology systems for a variety of end markets, released its results for the fiscal-2024 third quarter (ended June 30) and announced that the board of directors had approved a new $200 million stock buyback program. This announcement, along with upbeat revenue and operating income numbers, buoyed the stock, which added more than 7% later in the day.
Details
The IES Holdings board approved a share repurchase for $200 million on July 31. Recall that the company has been buying back shares since December 2022, when its board approved a $40 million buyback program, which has now been fully utilized.
CFO Tracy McLauchlin said the company is repurchasing shares to put its cash to work. In addition to the buyback, the third quarter saw IES Holdings acquire structural steel fabricator Greiner Industries, as well as the remaining 20% of Bayonet Plumbing, Heating & Air Conditioning (the initial 80% was purchased in December 2020). The press release states that despite these cash outlays, the company ended the quarter with a cash balance of $44.9 million.
What else was in the earnings
IES Holdings designs and installs integrated electrical and technology systems for residential housing and commercial and industrial facilities. It reported revenue of $768 million for the fiscal-2024 third quarter, which was up 31% year-over-year, while operating income surged 163% to $90.2 million. Diluted earnings per share came in at $2.67, almost 150% higher than a year before.
In the press release, the company noted that profit margins in the residential segment increased thanks to the expansion of its plumbing and HVAC service offerings into markets where it previously offered only electrical services. The performance in the commercial and industrial segment improved as well, boosted by high demand, particularly from data centers. Overall, CEO Jeff Gendell expects strong headline performance for the remainder of the 2024 fiscal year and into 2025. CFO Tracy McLauchlin added: “We expect to continue our strong cash flow generation for the remainder of fiscal 2024, positioning us to fund both organic expansion and acquisitions, as well as provide capital for stock repurchases or other investments.”
Market reaction
On Friday, IES Holdings stock climbed 7.15% to $154.96 per share on the Nasdaq exchange. It is now up 95.6% since the beginning of the year and up 168% over the last 12 months. Simply Wall St believes that IES Holdings is still massively undervalued, putting its fair value at $470.73 per share.
However, Simply Wall St has previously reported that over the past year, IES Holdings employees sold more than $150 million worth of the company’s shares without buying any, which could be a red flag, the outlet warns. Among the sellers were top executives, including the CEO and CFO. Additionally, Independent Director Todd Cleveland sold shares below market price, which Simply Wall St viewed negatively.
