Ituran Increases Dividend To 6% And Earns $35 Price Target From Barclay Analyst
MIAMI, April 15, 2024 /PRNewswire/ -- Ituran Location and Control (NASDAQ: ITRN) added $8 million to its dividend pool after a strong Q4, pushing its forward-looking yield to 6%. That attractive yield comes after the company posted record across-the-board financial metrics, including a 9% revenue increase year-over-year to $320 million, net income of $48 million, an increase of 30% year-over-year, and a 10% increase in EBITDA to $87 million. As of last Friday's close, ITRN's market cap is about $521 million.
That performance helped generate a bullish price target from an analyst at Barclay's, who models that Ituran shares could touch $35 within the next twelve months, an over 33% increase from current levels. That model likely factors in record revenues and the company generating $77 million in FY2023 operating cash flow, resulting from a string of deals from global companies interested in its revolutionary telematics and connected car ecosystem. The interest is warranted. Comparably, while some of ITRN's competitors do one or two things well, Ituran does many by leveraging strength from a full spectrum of innovative software solutions, in-vehicle sensors, and unique services and system functionality that do more than address challenges; they overcome them.
That distinction is a competitive advantage.
Ituran is Ushering in the Shift in Mobility Technology
Moreover, it's led to Ituran strengthening its leadership position in the emerging mobility technology field by providing value-added location-based services, particularly its full suite of services for the modern connected car. Served by its 2,800 employees from offices worldwide, Ituran is the largest OEM telematics provider in Latin America, with its products and applications used by customers in over 20 countries. By the end of 2023, Ituran products and services subscribers reached almost 2.3 million, increasing by 186,000 during the year and meeting growth guidance despite the challenging economic and geopolitical market landscapes.
As expected from record operating performances, Ituran ended the year financially solid, with year-end net cash and marketable securities of $53 million. That led to the increased dividend and the repurchase of $6.6 million in shares, representing a 6% passive income yield and a value driver from a forward-looking valuation perspective. The latter is significant, noting that the company only has about 20 million shares outstanding on a fully diluted basis.
Operating Momentum After an Impressive Q4/2023
Further supporting growth momentum, year-end results were fueled higher by an impressive Q4. For the period, net subscriber growth, meaning recurring revenue stream providers, increased by 42,000 when combining the new aftermarket subscribers of 38,000 with the net increase in OEM subscribers of 4,000. Revenues increased by 4% to $78 million, leading to net income of $12 million, 26% higher than a year ago. The performance prompted the Board to increase the dividend policy by 60% to $8 million for the quarter, a run rate of $32 million per year, based on the growing profitability and strong operating cash flow.
It also led to optimistic guidance about expectations in 2024. Management said it expects to add approximately 35,000 to 40,000 net new subscribers each quarter during 2024, contributing to EBITDA projections between $90-95 million. In 2025, EBITDA is targeted to surpass $100 million. Management noted that these targets are based on current exchange rates and assumed that Israel's current global macroeconomic and political situation does not significantly change. Results also show business resiliency.
Hardware installations and, therefore, product revenues were paused for at least several weeks following the outbreak of war in Israel on October 7. That caused some declines in a quarterly comparison. However, year-over-year, Ituran growth was impressive. Moreover, despite supply-chain issues, gross margins stayed strong, with subscription revenues around 58% and the gross margin on products at 22%. That facilitated Q4 operating income increasing by 8% to $16.5 million, compared to $15.3 million in the fourth quarter of last year.
Value Drivers are Active in 2024
Factoring together financial results, interim project updates, and 2024 guidance, the company guided for growth to continue this year. Additionally, the company will continue its previously announced $25 million share buy-back program, which increased to $35 million last February. With roughly $6.7 million remaining under that authorization, it's timely and accretive during challenging markets.
More than solid financial performance contributing to growth, ITRN noted during its recent conference call that value drivers should continue to accrue from different segments, including those created by insurance companies and car owners, especially in Israel, who are looking for effective security systems to protect assets.
In other countries, Ituran is focused on monetizing market opportunities on the B2B side, working with financial institutions to offer asset protection and security solutions when they provide loans to new car buyers. In Latin America, where there has been an increase in car theft and damage from violence, the company is focused on penetrating those markets more quickly this year to capitalize on that revenue-generating market opportunity and add traction to its goal of surpassing $100 million in 2025 EBIDTA.
Combining the sum of Ituran's parts and those expected to be added, the company is well-positioned to reach that intention.
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SOURCE Ituran Location and Control, Ltd.
