Environmental engineering and remediations company Montrose Environmental Group (MEG 4.74%) reported growth in the fourth quarter and sees 2024 coming in better than Wall Street had expected. Investors are cheering the results, sending shares of Montrose up 17% as of 10 a.m. Eastern.
A strong year and the promise of more to come
Montrose works with government and commercial customers dealing with the challenges of environmental regulations and cleanups. The company earned $0.27 per share in the fourth quarter on revenue of $165.7 million, topping the consensus analyst estimate of $0.17 per share in earnings on sales of $160 million.
Revenue was up 18.8% year over year, including the impact of acquisitions. For the full year, Montrose generated sales of $624.2 million, up 14% from 2022.
"Our record full year results reflect continued strength across our business," CEO Vijay Manthripragada said in a statement. "Demand for our unique, integrated solutions remains at all-time highs given another year of exceptional customer revenue retention at 96% and cross-selling activity increasing to 51% of full year revenue."
The company in 2023 filed for nine patents addressing wastewater and landfill challenges.
This is a fragmented industry, and Montrose is focused on expanding its capabilities via acquisitions. Montrose has already bought two companies in 2024, including Colorado-based Two Dot Consulting to expand its presence in the Rocky Mountain states.
Is Montrose Environmental a buy after its strong earnings report?
The company is expecting to grow sales by at least 8% in 2024, setting a forecasted revenue range of $675 million to $725 million. That's ahead of the $667 million that Wall Street had expected. And with the greater scale, Montrose is beginning to generate more cash, with cash provided by operating activities growing to $56 million in 2023 from $20.6 million the prior year.
Rollup strategies are fraught with risk, as acquisitions can be distracting and dangerous. But Montrose is establishing an expertise in dealmaking, and the long-term demand for its services shows no signs of slowing.
This has been a volatile stock in recent years, and investors should understand the risks that come with dealmaking before buying in. But for those seeking exposure to infrastructure improvement and who are willing to take on some uncertainty, Montrose is an intriguing investment even after Thursday's jump higher.
