Shyft Group Inc

Shyft Group Inc. (NASDAQ: SHYF) is engaged in specialty vehicle manufacturing and assembly for the commercial vehicle. The Company provides last-mile delivery, specialty service and vocation-specific upfit segments, as well as it serves recreational vehicle industries. The Company’s reportable segments include Fleet Vehicles and Services (FVS) and Specialty Vehicles (SV). 

Recent Financial and Business Updates:

• Third Quarter 2023 Highlights:
  • Sales totaled USD 201.3 million, marking a 29.6% decrease from USD 286.1 million in the third quarter of 2022.
  • Net income for the quarter was USD 4.5 million, or USD 0.13 per share, in contrast to USD 17.3 million, or USD 0.49 per share in the same period of 2022. The 2023 net income includes a tax benefit of USD 2.0 million, primarily due to R&D tax credit adjustments.
  • Adjusted EBITDA reached USD 11.0 million, equivalent to 5.5% of sales, representing a decrease of USD 16.1 million from USD 27.1 million, or 9.5% of sales in the previous year. These results incorporate USD 7.6 million of EV program costs, consistent with the prior year.
  • Adjusted net income amounted to USD 6.7 million, or USD 0.19 per share, compared to USD 18.6 million, or USD 0.53 per share in the previous year.
  • The consolidated backlog stood at USD 464.4 million as of September 30, 2023, marking a 55.5% decrease from USD 1.0 billion as of September 30, 2022.
  • Operating cash flow was USD 9.2 million, representing a USD 17.0 million increase compared to an outflow of USD 7.8 million in the prior year.
  • The company issued its second annual Sustainability Report, highlighting progress in achieving environmental, social, and governance goals.

• Third Quarter 2023 Business Segment Highlights:
• Fleet Vehicles and Services (FVS):
  • Sales of USD 124.3 million, a decrease of 32.6% from USD 184.5 million in the third quarter of 2022.
  • Adjusted EBITDA of USD 8.0 million, equivalent to 6.4% of sales, a decrease of USD 16.4 million from USD 24.4 million, or 13.2% of sales.
  • Segment quarter-end backlog of USD 383.4 million, down 58.1% compared to USD 915.1 million in the prior year.

• Specialty Vehicles (SV):
  • Sales of USD 76.6 million, a decrease of 26.3% from USD 103.9 million in the third quarter of 2022.
  • Adjusted EBITDA of USD 16.0 million, equivalent to 20.9% of sales, an increase of USD 0.4 million from USD 15.6 million, or 15.0% of sales.
  • Segment quarter-end backlog of USD 81.0 million as of September 30, 2023, down 37.1% compared to USD 128.8 million in the prior year.

• Disciplined Capital Allocation:
  • The company emphasized the strength of its balance sheet as a competitive advantage and its focus on cash conversion and efficient capital deployment. In 2023, the company repurchased USD 10.3 million in shares with USD 223 million remaining under the existing share repurchase authorization.
  • Capital expenditure of USD 5.2 million was funded, including investment in Blue Arc.
  • Regular dividends of USD 1.7 million were paid, reflecting a dividend of USD 0.05 per share.

• 2023 Financial Outlook:
  • The company is narrowing its full-year 2023 outlook to the lower end of the range due to end-market challenges and operational inefficiencies.
  • Sales are expected to be in the range of USD 850 million to USD 900 million, compared to the previous outlook of USD 850 to USD 950 million.
  • Adjusted EBITDA is projected to be USD 40 to USD 45 million, down from the previous outlook of USD 40 to USD 60 million.
  • Net income is anticipated to be USD 4 to USD 9 million, with favorable adjustments for R&D tax credits, compared to the previous outlook of USD 1 to USD 16 million.
  • Earnings per share are estimated to be USD 0.13 to USD 0.27, revised from the previous outlook of USD 0.03 to USD 0.46.
  • Adjusted earnings per share are expected to be USD 0.42 to USD 0.56, a change from the previous outlook of USD 0.33 to USD 0.76.
    

Technical Observation (on the daily chart)

The price of SHYF stock has shown a consistent downward trend since making 52-week high on February 02, 2023, correcting around 69.27%. Currently, the stock is near an important support zone of USD 9.00-USD 10.50, from where price has taken support in the past. The RSI (14 period) momentum indicator is in the oversold zone with a value of 17.46, with expectations of some consolidation or a short-term upside momentum. Moreover, the price is currently positioned below both the 21-day SMA and 50-day SMA trend-following indicators, which may act as dynamic short-term resistance levels.

As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Speculative Buy’ rating has been given to Shyft Group Inc. (NASDAQ: SHYF) at the current price of USD 10.50 as of October 30, 2023, 08:15 am PDT.

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

The reference date for all price data, currency, technical indicators, support, and resistance levels is October 30, 2023. The reference data in this report has been partly sourced from REFINITIV. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

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