Alta Equipment Group ($ALTG): Is the Cycle Turning Fast Enough?
The 9% 2L notes trade around 95 for a ~11% YTW. Lift-truck bookings are improving, but the earnings and FCF have not followed yet.
Everyone wants exposure to the megaproject equipment cycle right now. Somebody is pouring concrete for a gigawatt campus in Texas, somebody else is renting the excavators, and the scaled rental names positioned around those projects have the earnings to show for it.
Alta Equipment Group sells forklifts in Michigan.
It sells earthmovers in Florida and Ontario too, and the underlying business is not bad: real dealership franchises, exclusive Hyster-Yale and Volvo territories, 1,300 technicians, and a parts and service annuity that keeps paying for years after a machine is sold. What Alta does not have is meaningful exposure to the megaproject and specialty work driving the current equipment enthusiasm. Its customers are mid-sized manufacturers and local contractors, and that end of the market is flat
So it trades like it. The 9% 2L notes due Jun 2029 are yielding ~11% YTW, placing them among the wider industrial credits in the market. Company-reported net leverage is 4.9x against a maturity that is now inside 3 years.
The cycle may also be turning. Material Handling bookings are improving, Hyster-Yale is pointing to a strong 2H, and management says the OEM discounting that compressed Construction Equipment margins is beginning to ease. Some of the leading indicators are better, even if the improvement has not yet reached reported earnings or recurring FCF.
That is the setup: a cheap-looking bond, a business that may be approaching the bottom, and a market that demanding ~11% to underwrite the refinancing path.
Editor’s Note: This week I am trying a different report format. I would be interested in feedback on whether you would like to see more reports presented this way. Will follow-up with a survey in the coming week.