DXP Enterprises, Inc. (DXPE) Bundle
Understanding DXP Enterprises, Inc. (DXPE) Revenue Streams
Understanding DXP Enterprises, Inc.’s Revenue Streams
Sales Performance
Sales for the three months ended September 30, 2024, were $472.9 million, representing a 12.8% increase from $419.2 million in the prior year's corresponding period.
For the nine months ended September 30, 2024, sales totaled $1,331.1 million, an increase of 4.7% from $1,271.6 million in the previous year.
Breakdown of Sales by Business Segment
| Segment | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Service Centers | $316.8 million | $294.5 million | $22.4 million | 7.6% |
| Innovative Pumping Solutions | $89.8 million | $58.9 million | $30.9 million | 52.3% |
| Supply Chain Services | $66.3 million | $65.8 million | $0.5 million | 0.7% |
| Total Sales | $472.9 million | $419.2 million | $53.7 million | 12.8% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the three months ended September 30, 2024, was 12.8%, and for the nine months ended September 30, 2024, it was 4.7%.
Detailed Analysis of Revenue Contributions
| Segment | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Service Centers | $911.8 million | $914.1 million | ($2.3 million) | (0.3%) |
| Innovative Pumping Solutions | $225.4 million | $158.4 million | $67.0 million | 42.3% |
| Supply Chain Services | $193.9 million | $199.0 million | ($5.1 million) | (2.6%) |
| Total Sales | $1,331.1 million | $1,271.6 million | $59.6 million | 4.7% |
Significant Changes in Revenue Streams
The most notable change in revenue streams was the substantial growth in the Innovative Pumping Solutions segment, which experienced a 52.3% increase in the third quarter of 2024 compared to the same period in 2023. This growth was primarily driven by increased project-related work and acquisitions in the water and wastewater markets.
In contrast, the Service Centers segment saw a slight decline of 0.3% for the nine months ended September 30, 2024, attributed to timing and business mix effects, despite benefiting from acquisitions.
The Supply Chain Services segment also experienced a decline, with sales decreasing by 2.6% for the nine months ended September 30, 2024, primarily due to customer facility closures affecting revenue.
A Deep Dive into DXP Enterprises, Inc. (DXPE) Profitability
A Deep Dive into DXP Enterprises, Inc. Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $146,110 thousand, representing a gross profit margin of 30.9% compared to 29.9% for the same period in 2023. For the nine months ended September 30, 2024, gross profit stood at $407,785 thousand, reflecting a margin of 30.6%, up from 30.1% in 2023.
Operating Profit Margin: Operating income for the three months ended September 30, 2024, was $39,608 thousand, yielding an operating profit margin of 8.4%, slightly down from 8.6% in 2023. For the nine months ended September 30, 2024, operating income was $106,091 thousand, resulting in an operating margin of 8.0%, compared to 8.6% in the previous year.
Net Profit Margin: The net income for the three months ended September 30, 2024, was $21,101 thousand, giving a net profit margin of 4.5% compared to 3.9% in 2023. For the nine months ended September 30, 2024, net income was $49,126 thousand, resulting in a net profit margin of 3.7%, down from 4.2% in 2023.
Trends in Profitability Over Time
Over the three months ended September 30, 2024, sales increased by 12.8% to $472,935 thousand from $419,249 thousand in 2023. For the nine months, sales rose by 4.7% to $1,331,126 thousand from $1,271,556 thousand in 2023.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry averages for the gross profit margin are approximately 30.0%, while operating margins are around 7.5%. The net profit margin average is about 4.0%. DXP Enterprises, Inc. is performing slightly above the industry average for gross profit and net profit margins but below in operating profit margins.
Analysis of Operational Efficiency
The company reported selling, general, and administrative expenses (SG&A) of $106,502 thousand for the three months ended September 30, 2024, an increase of 18.7% compared to $89,706 thousand in 2023. For the nine months, SG&A expenses were $301,694 thousand, up from $273,720 thousand in 2023, reflecting a 10.2% increase. This rise in expenses has impacted operating income, which decreased by 2.4% for the nine months ended September 30, 2024.
| Metric | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change |
|---|---|---|---|---|---|---|
| Sales (thousands) | $472,935 | $419,249 | +12.8% | $1,331,126 | $1,271,556 | +4.7% |
| Gross Profit (thousands) | $146,110 | $125,562 | +16.4% | $407,785 | $382,455 | +6.6% |
| Operating Income (thousands) | $39,608 | $35,856 | +7.0% | $106,091 | $108,735 | -2.4% |
| Net Income (thousands) | $21,101 | $16,172 | +30.0% | $49,126 | $52,806 | -6.4% |
Effective Tax Rate: The effective tax rate for the three months ended September 30, 2024, was 11.1% compared to 26.3% in 2023. For the nine months ended September 30, 2024, the effective tax rate was 21.1%, down from 26.8% in the previous year.
Debt vs. Equity: How DXP Enterprises, Inc. (DXPE) Finances Its Growth
Debt vs. Equity: How DXP Enterprises, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the total debt of DXP Enterprises, Inc. was $544.5 million, which consists solely of a Senior Secured Term Loan B. The breakdown of the long-term debt is as follows:
| Debt Type | Amount (in millions) |
|---|---|
| Senior Secured Term Loan B | $544.5 |
| Current Maturities | $5.5 |
| Total Long-Term Debt | $539.0 |
The debt levels indicate a strong reliance on long-term financing, specifically through the term loan, which is due to mature on October 13, 2030. The interest rate for this loan was approximately 10.16% as of September 30, 2024.
Debt-to-Equity Ratio and Comparison to Industry Standards
As of September 30, 2024, the company's equity stood at $402.4 million, yielding a debt-to-equity ratio of approximately 1.35. This ratio is indicative of a significant reliance on debt financing compared to equity. The industry average for companies in the same sector typically ranges from 0.75 to 1.25, suggesting that DXP Enterprises is above the average in terms of leverage.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In October 2023, the company amended its existing Senior Secured Term Loan B, which allowed for an additional $125 million in new incremental commitments, bringing total borrowings under this facility to $550 million. The loan was refinanced under terms that include a quarterly amortization of 0.25%.
As of September 30, 2024, there were no outstanding borrowings on the asset-backed line of credit, which has a borrowing capacity of $135 million. The company maintains a strong liquidity position with $35 million in cash and $131.6 million in available credit.
How the Company Balances Between Debt Financing and Equity Funding
DXP Enterprises primarily finances its operations through cash flow generated from operations, supplemented by bank borrowings. The company reported $70.1 million in cash generated from operating activities for the nine months ended September 30, 2024.
The company has strategically utilized debt for growth, particularly in funding acquisitions, which amounted to $149.4 million during the same period. This approach reflects a balanced strategy of leveraging debt while maintaining sufficient operating cash flow to support debt servicing and operational needs.
Financial Covenants
As of September 30, 2024, the company was in compliance with all financial covenants, including a Fixed Charge Coverage Ratio of 1.72 to 1.00, which is above the minimum requirement of 1.00 to 1.00.
Assessing DXP Enterprises, Inc. (DXPE) Liquidity
Assessing DXP Enterprises, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
Current Assets: $554,581,000
Current Liabilities: $249,363,000
Current Ratio = Current Assets / Current Liabilities = 2.22
Quick Ratio: The quick ratio is calculated by excluding inventories from current assets:
Quick Assets: $554,581,000 - $109,787,000 = $444,794,000
Quick Ratio = Quick Assets / Current Liabilities = 1.79
Analysis of Working Capital Trends
Working Capital = Current Assets - Current Liabilities = $554,581,000 - $249,363,000 = $305,218,000
Comparing to the previous year, working capital has shown an increase, indicating improved liquidity.
Cash Flow Statements Overview
| Cash Flow Category | 2024 (Nine Months Ended September 30) | 2023 (Nine Months Ended September 30) |
|---|---|---|
| Net Cash Provided by Operating Activities | $70,068,000 | $63,775,000 |
| Net Cash Used in Investing Activities | $(165,113,000) | $(15,951,000) |
| Net Cash Used in Financing Activities | $(42,384,000) | $(66,744,000) |
Potential Liquidity Concerns or Strengths
Available Cash: $35,000,000
Credit Facility Availability: $131,600,000
Asset-Backed Line of Credit (ABL Revolver): $135,000,000
Letters of Credit: $3,400,000
Outstanding Borrowings on ABL Revolver: $0
As of September 30, 2024, the Fixed Charge Coverage Ratio is 1.72 to 1.00, indicating compliance with financial covenants and a healthy liquidity position.
Is DXP Enterprises, Inc. (DXPE) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of DXP Enterprises, Inc. (DXPE) involves examining key financial ratios, stock price trends, dividend yields, and analyst consensus to assess whether the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the diluted earnings per share (EPS) was $2.93 . With a stock price of approximately $20.00, the P/E ratio can be calculated as follows:
P/E Ratio = Stock Price / EPS = $20.00 / $2.93 ≈ 6.83
Price-to-Book (P/B) Ratio
The book value per share, calculated from total equity of $402.368 million and 15.750 million shares outstanding, is approximately:
Book Value per Share = Total Equity / Shares Outstanding = $402.368 million / 15.750 million ≈ $25.55
Assuming the stock price remains at $20.00, the P/B ratio is:
P/B Ratio = Stock Price / Book Value per Share = $20.00 / $25.55 ≈ 0.78
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, EBITDA was reported at $133.320 million . The enterprise value (EV) can be derived from market capitalization and net debt. Assuming a market capitalization of $315 million and total debt of $544.500 million :
EV = Market Cap + Total Debt - Cash = $315 million + $544.500 million - $35 million ≈ $824.5 million
Thus, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $824.5 million / $133.320 million ≈ 6.18
Stock Price Trends
Over the past 12 months, stock prices have fluctuated significantly. The stock price averaged around $18.50 at the beginning of the year and has seen a high of $22.00 and a low of $15.00 .
Dividend Yield and Payout Ratios
As of 2024, DXP Enterprises has not declared any dividends, resulting in a dividend yield of 0% . The payout ratio remains at 0% due to the absence of dividend payments.
Analyst Consensus on Stock Valuation
Current analyst consensus indicates a mix of ratings, with a majority suggesting a Hold position, while a minority recommends Buy . The average target price across analysts is approximately $21.00.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 6.83 |
| P/B Ratio | 0.78 |
| EV/EBITDA Ratio | 6.18 |
| Stock Price (Current) | $20.00 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing DXP Enterprises, Inc. (DXPE)
Key Risks Facing DXP Enterprises, Inc.
DXP Enterprises, Inc. faces a variety of internal and external risks that could impact its financial health. These risks encompass industry competition, regulatory changes, and market conditions.
Industry Competition
The company operates in a highly competitive market, particularly in the MRO (Maintenance, Repair, and Operations) sector. As of September 30, 2024, the company's total sales amounted to $472.9 million, a 12.8% increase compared to the previous year, driven by strategic acquisitions and increased project-related work. However, competition from both established players and new entrants poses a constant threat, potentially affecting market share and pricing power.
Regulatory Changes
Regulatory changes can significantly impact operational costs and compliance requirements. The company is subject to various federal and state regulations that govern safety and environmental standards. The effective tax rate for the nine months ended September 30, 2024, was 21.1%, down from 26.8% in the previous year, indicating potential changes in tax regulations affecting profitability. Recent guidance from the OECD on Pillar Two rules is expected to have an immaterial impact based on current legislation.
Market Conditions
Fluctuations in economic conditions impact demand for DXP's products and services. For instance, the total net income for the nine months ended September 30, 2024, was $49.1 million, compared to $52.8 million in the same period in 2023, reflecting potential market headwinds. Additionally, the company's cash flow from operating activities was $70.1 million, showing an increase but still vulnerable to market downturns.
Operational Risks
Operational risks include supply chain disruptions, which could affect inventory levels and lead to increased costs. As of September 30, 2024, the company reported inventories of $109.8 million. The company must manage these risks effectively to maintain operational efficiency and profitability.
Financial Risks
Financial risks primarily relate to the company's debt management. The total long-term debt was reported at $544.5 million, with an interest expense of $46.6 million for the nine months ended September 30, 2024. Managing this debt, especially in a rising interest rate environment, is crucial for sustaining financial health.
Mitigation Strategies
To address these risks, the company has implemented several strategies:
- Continuous monitoring of market trends and competitive dynamics to adapt business strategies.
- Investment in compliance and risk management programs to navigate regulatory changes effectively.
- Enhancing supply chain resilience through diversified sourcing and inventory management practices.
- Active management of debt levels and interest rates through refinancing and strategic financial planning.
Financial Overview Table
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Sales | $472.9 million | $419.2 million | +12.8% |
| Net Income | $21.1 million | $16.2 million | +30.0% |
| Long-term Debt | $544.5 million | $548.6 million | -0.2% |
| Interest Expense | $46.6 million | $36.1 million | +29.4% |
| Effective Tax Rate | 21.1% | 26.8% | -5.7% |
Future Growth Prospects for DXP Enterprises, Inc. (DXPE)
Future Growth Prospects for DXP Enterprises, Inc.
Analysis of Key Growth Drivers
The company has identified several key growth drivers that are expected to enhance its market position:
- Product Innovations: The Innovative Pumping Solutions segment saw sales increase by $30.9 million, or 52.3%, for the three months ended September 30, 2024, compared to the same period in 2023, driven by increased project-related work and acquisitions in the water and wastewater markets.
- Market Expansions: Recent acquisitions contributed $15.6 million to the Innovative Pumping Solutions segment sales.
- Acquisitions: The company has engaged in significant acquisition activity, with total cash paid for acquisitions reaching $149.4 million for the nine months ended September 30, 2024, compared to $8.8 million for the same period in 2023.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections indicate a positive trend, with total sales for the nine months ended September 30, 2024, at approximately $1,331.1 million, reflecting a growth of 4.7% from $1,271.6 million in the prior year. The company anticipates continued revenue growth, driven by its strategic initiatives and market demand.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic partnerships and operational efficiencies are central to the company's growth strategy. The company has focused on expanding its market reach and enhancing service offerings, particularly in the MRO products and services sector. The establishment of new customer relationships and improved logistics capabilities are expected to bolster sales further.
Competitive Advantages That Position the Company for Growth
DXP Enterprises has several competitive advantages that enhance its growth potential:
- Diverse Product Portfolio: The company offers a wide range of MRO products and services, which positions it well to meet diverse customer needs across multiple sectors.
- Strong Financial Position: As of September 30, 2024, the company reported available cash of $35.0 million and credit facility availability of $131.6 million, providing a solid foundation for future investments.
- Improved Operational Efficiency: The company has reported an operational income of $39.6 million for the three months ended September 30, 2024, an increase from $35.9 million in the same period of 2023.
| Metric | 2024 (as of Sep 30) | 2023 (as of Sep 30) | Change (%) |
|---|---|---|---|
| Total Sales | $1,331.1 million | $1,271.6 million | 4.7% |
| Net Income | $49.1 million | $52.8 million | -6.5% |
| Earnings per Share (Basic) | $3.08 | $3.08 | 0% |
| Cash on Hand | $35.0 million | N/A | N/A |
| Credit Facility Availability | $131.6 million | N/A | N/A |
Overall, DXP Enterprises, Inc. is poised for continued growth through strategic acquisitions, product innovations, and market expansions, supported by a solid financial foundation and competitive advantages in the MRO products sector.
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Resources:
- DXP Enterprises, Inc. (DXPE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of DXP Enterprises, Inc. (DXPE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View DXP Enterprises, Inc. (DXPE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.