VIRC - Virco's Q1 Was Good But Backlogs Point To Challenges Ahead
2024-06-13 15:33:17 ET
Summary
- Virco posted significant revenue growth, at 33%, with gross and operating margin expansion.
- However, a big part of that growth was generated by a less recurring disaster relief project. Without it, revenues would have grown 8%.
- Looking ahead, the company's backlogs and inventories continue to shrink. These are not good indicators for the 2Q and 3Q busy seasons.
- On the other hand, shipping prices are rising in China. This might become a tailwind for Virco this season or next year.
- Virco is valued for an optimistic scenario (business as in the past two years), leaving little upside opportunity and significant downside risk. I continue to believe the stock is a Hold.
Virco Mfg. Corporation ( VIRC ) is a US manufacturer of school furniture.
In this article, I review the company's Q1 results . The company's revenues were up meaningfully (33%), mostly aided by a disaster relief project (explaining 25% of the 33% increase). As a manufacturer, the revenue increase is leveraged through the income statement, so Virco posted higher gross and operating margins. The company posted positive EPS in a quarter that generally generates losses because of the low seasonal demand. The company initiated a quarterly dividend and started repurchasing shares....
Virco's Q1 Was Good But Backlogs Point To Challenges Ahead