Shares of Willdan Group surged today, up over 24% on the back of another set of strong quarterly results reported after the close of the market yesterday. Indeed, fueled by end-of-year expansions on some of its utility programs and continued solid demand across the broad range of its services, net revenue (excludes subcontractor services and other costs that are passed on directly to customers) for Q4 climbed 25.1% from the prior year to a record $80.8 million and came in well above the $63.8 million analysts had been expecting. Further boosted by a favorable mix and a significant reduction in its effective tax rate from 42.3% to 19.4%, which also more than made up for higher interest cost, adjusted earnings soared 122.2% to 80 cents per share, trouncing the 38-cent consensus view. And to top it all off, this much better-than-expected operating performance also drove the production of $12.8 million in free cash flow to finish 2023, which is more than five times the $2.3 million it hauled in in the final quarter of 2022.
What’s more, WLDN sees net revenue and adjusted earnings climbing to $270-280 million and $1.80-1.87 per share in 2024. While the midpoints of these ranges indicate year-over-year top and bottom-line growth of only 2% and 5% from the record levels achieved in 2023 due to the company’s much better-than-expected end to last year, this too is way better than the $267.2 million and $1.51 per share projected by the Street and reflects the robust pipeline of potential opportunities that supports significant new software wins anticipated in the first half of 2024, strong organic growth in its engineering business, recovery of program management work that had slowed during COVID, and a record high program management backlog entering 2024.
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This improving operating performance and forecast ahead also provided enough confidence in WLDN’s future financial position to have it considering resuming its acquisition program with a growing pipeline of potential deals already available to evaluate. Together with additional opportunities to expand in states like Florida and Texas due to demographic shifts and increased activity for municipal clients, I think WLDN remains well positioned for further growth beyond the current year as well. As this continues to play out, I see additional upside for the stock ahead.