Integration Of Mobile Mini Will Streamline Operations And Improve Sales Efficiency

Key Takeaways

• Integration and technology upgrades are poised to streamline operations and elevate revenue growth, enhancing margins and efficiency.
  
• Dividend programs and share buybacks indicate a commitment to returning capital, potentially boosting shareholder value through higher EPS.
  
• Economic and integration challenges, coupled with potential interest rate increases, pose risks to WillScot's revenue, margins, and growth in modular and storage leasing.

Catalysts

Provides turnkey temporary space solutions in the United States, Canada, and Mexico.

• Integration of Mobile Mini and WillScot operations and sales teams is expected to lead to streamlined execution and improved sales efficiency, potentially enhancing revenue growth.
  
• The commercialization of cold storage and clearspan structures platforms in 2025 is anticipated to contribute to new revenue streams, boosting overall revenue potential.
  
• Upgraded digital marketing tools, CRM sales dashboard, and pricing technology will likely enhance sales productivity and conversion rates, positively impacting net margins and earnings.
  
• Focus on operational excellence, such as optimizing logistics resources and improving back-office processes, is expected to drive increased efficiency, leading to margin expansion.
  
• The addition of a dividend program and ongoing share buybacks suggest a focus on returning capital to shareholders, which can enhance earnings per share (EPS) by reducing the share count.

WillScot Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming WillScot Holdings's revenue will grow by 2.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.2% today to 14.8% in 3 years time.
• Analysts expect earnings to reach $385.7 million (and earnings per share of $2.37) by about March 2028, up from $28.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.0x on those 2028 earnings, down from 195.5x today. This future PE is lower than the current PE for the US Construction industry at 24.1x.
• Analysts expect the number of shares outstanding to decline by 3.47% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.91%, as per the Simply Wall St company report.

WillScot Holdings Future Earnings Per Share Growth

Risks

• The expectation of continued nonresidential construction headwinds presents a risk to growth, which could affect WillScot's ability to achieve top-line revenue growth.
  
• Modular activations are down year-over-year due to large projects being completed, with uncertain trends in construction starts potentially impacting future demand and revenue.
  
• The potential rise in interest rates and economic uncertainty could lead to cautious customer spending, impacting WillScot's ability to maintain or grow its storage and modular leasing operations, affecting revenue.
  
• Execution risks associated with the integration of sales and operations teams could lead to inefficiencies if not managed correctly, which may impact revenue and net margins.
  
• There is a risk with the higher capital expenditure expectations in 2025 needed to maintain the business and invest in growth, which could compress net margins or earnings if revenue growth does not materialize as planned.

Valuation

• The analysts have a consensus price target of $41.654 for WillScot Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $50.0, and the most bearish reporting a price target of just $32.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.6 billion, earnings will come to $385.7 million, and it would be trading on a PE ratio of 23.0x, assuming you use a discount rate of 8.9%.
• Given the current share price of $29.95, the analyst price target of $41.65 is 28.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.