DSGR - Distribution Solutions Group: Results Tracking As Expected
2024-05-20 10:21:54 ET
Summary
- Distribution Solutions Group's Q1 2024 results came in largely with where I was expecting them.
- Looking out, their end-markets are attractively starting to stabilize/grow with only TestEquity continuing to lag, although management's optimistic things turn here too.
- With cross-selling continuing, margin growth opportunities from an unoptimized salesforce, and accretive capital allocation, investors can earn attractive returns.
Introduction
Distribution Solutions Group’s ( DSGR ) share price remains relatively unchanged after posting Q1 2024 results. The results came in largely with what I was expecting, and as such, I continue to believe that the core variables - internal organic growth opportunities and accretive capital allocation - remain intact to support long-term sales and EBITDA growth. Thus, at mid-$30/share, I continue to believe that prospective forward returns remain relatively attractive.
Lawson: Sales & Margins Tracking As Expected
Lawson posted $118M in sales in Q1 2024, down ~5.6% from the $125M posted last year, but up ~7% sequentially from the $110M posted in Q4 2023. As I noted last time, pricing changes have slowed to now being relatively immaterial given broader cost inflation stabilization, consistent with their “ flat ” comments. They did acquire, however, Illinois-based Emergent Safety Supply ((ESS)) for ~$10M in January, which apparently runs ~$13M in sales annually. Minus the $2.3M benefit, Q1 2024 organic sales were ~$116M, down ~8% from 1Q23, and up ~6% from 4Q23....
Distribution Solutions Group: Results Tracking As Expected