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Myers Industries, Inc. (NYSE:MYE): A Diversified Manufacturer Poised for Growth
Published on September 24, 2024 | Ticker: MYE

Myers Industries, Inc. (NYSE:MYE) is a leading manufacturer of a wide range of polymer products for industrial, agricultural, automotive, commercial and consumer markets. The company is also the largest distributor of tools, equipment and supplies for the tire, wheel, and under-vehicle service industry in the U.S. With a diverse product portfolio and strategic initiatives underway, Myers Industries is well-positioned for continued growth and profitability.

Business Overview

Myers Industries operates through two main segments: Material Handling and Distribution. The Material Handling segment manufactures a broad selection of plastic reusable containers, pallets, small parts bins, bulk shipping containers, storage and organization products, OEM parts, custom plastic products, composite ground protection matting, consumer fuel containers and tanks for water, fuel and waste handling. The Distribution segment is engaged in the distribution of equipment, tools, and supplies used for tire servicing and automotive under-vehicle repair, as well as the manufacture of tire repair and retreading products.

Financials

In 2023, Myers Industries generated annual revenue of $813.1 million and net income of $48.9 million. The company's annual operating cash flow was $86.2 million, while free cash flow reached $63.3 million. These strong financial results demonstrate the company's ability to generate consistent cash flow to fund its growth initiatives and return capital to shareholders.

Acquisition of Signature Systems

A key highlight for Myers Industries in 2024 was the acquisition of Signature Systems, a leading manufacturer of ground protection and turf protection solutions. The $348.9 million acquisition, which closed in February 2024, is expected to be a significant catalyst for the company's growth.

In the first quarter of 2024, Signature Systems contributed $19.3 million in revenue and $2.9 million in operating income to the Material Handling segment. The integration of Signature Systems has progressed smoothly, and Myers Industries continues to be impressed with the quality and leadership of the acquired business.

The Signature Systems acquisition aligns with Myers Industries' strategy to transform the company into a high-growth, customer-centric innovator of value-added engineered plastic solutions. The company believes Signature will be a pivot point in accelerating its transformation, as it adds strong brands, differentiated technology and excellent leadership to the Material Handling portfolio.

Operational Initiatives and Cost Savings

While Myers Industries faced some near-term challenges in certain end markets during the first quarter of 2024, the company is taking proactive measures to improve its performance. In the Distribution segment, the company is focused on integrating the Mohawk acquisition and regaining sales momentum.

To mitigate the impact of softer demand in some end markets, Myers Industries is implementing $7 million to $9 million in annualized cost reduction initiatives, in addition to the $8 million in cost synergies expected from the Signature Systems acquisition. These combined $15 million to $17 million in annual cost savings and margin improvement actions demonstrate the company's agility in managing through near-term headwinds.

In the Material Handling segment, Myers Industries continues to invest in new product development and innovation. The company highlighted the success of its Scepter military containers and the launch of the Flo N' Go power fuel station, which it believes will be a strong performer in the market.

Liquidity

As of March 31, 2024, Myers Industries had $32.7 million in cash and $235.4 million available under its amended loan agreement. The company's debt to adjusted EBITDA ratio was 4.2x, which is in line with its acquisition strategy of maintaining a net debt leverage ratio of approximately 3x at the time of a major acquisition, with a target to be under 2x within 2 years.

Myers Industries' strong liquidity and financial flexibility provide the company with the resources to execute its growth initiatives, both organically and through strategic acquisitions, while also returning capital to shareholders through its dividend program.

Outlook

For the full year 2024, Myers Industries is maintaining its guidance for adjusted earnings per share of $1.30 to $1.45, though the company is guiding towards the lower end of the range due to the first quarter's performance. The company remains confident in its long-term growth prospects, driven by the Signature Systems acquisition, new product development, and continued efficiency improvements.

Conclusion

Overall, Myers Industries' diversified business model, strategic initiatives, and strong financial position make it a compelling investment opportunity. The company's focus on branded, differentiated products, coupled with its ability to manage costs and generate consistent cash flow, positions it well for future growth and value creation.

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