Last week, Singular Research reiterated a Buy rating on Miller Industries, Inc. (MLR), the world’s largest vehicle towing and recovery equipment manufacturer. The company offers a range of wrecker, car carrier, and trailer bodies. In the fourth quarter, Miller reported a 37 percent increase in year-over-year sales to $109.4 million, beating out estimates, due to recovering commercial demand. Earnings grew 43 percent to $0.43 per share, but missed our estimates.
Miller is well-positioned to take advantage of opportunities with its lean cost structure and flexible manufacturing capabilities. The company also repurchased 1.2 million shares in 2011, which is about 10 percent of its outstanding shares.
Miller is increasing its commercial production and actively working on government-related tenders in a number of countries. The company’s French subsidiary was recently awarded a French military contract as well. However, while government business made up approximately 20 percent of total sales, Miller does not expect additional large military orders in the near term. As a result, Singular is reducing its EPS estimates due this uncertainty of government orders.
We have adjusted our price target to $25, which would be 14.5x our EPS estimates for 2012. However, subtracting $4.50 of cash the company has, the price target is only 12x our 2012 EPS estimates.