Earnings Preview: Fourth Quarter 2024

The fourth quarter earnings season is already in full swing for TSX issuers, while most TSX Venture issuers will report sometime in April. With over 160 companies on my regular watch list, there will be lots of action to follow!

Are you expecting any surprises? Who's going to beat expectations? Who's going to disappoint?

Here are a few names I'll be watching closely!

Strong Quarter Expected: iFabric (TSX: IFA)

iFabric offers a range of innovative apparel products, including high-performance sports apparel, medical protective apparel, consumer protective apparel, and proprietary treatments that impart intelligent properties to fabrics.

The company already released its full-year preliminary revenue in early February, which caused the stock to jump over 20% before settling back down to its previous price.

The fourth quarter is expected to be a monster, with over $10.2 million in revenue compared to $16.8 million for the first nine months of the year. Based on the company’s gross margin and operating expenses profile, I wouldn’t be surprised to see a 20-25% profit margin at this quarterly revenue level.

I will also be watching for potential 2025 guidance. A combination of a strong quarter plus a strong outlook could send the stock much higher.

The company is expected to report on March 31.

Underdog to Watch: Omni-Lite Industries (TSX-V: OML)

Omni-Lite develops and manufactures mission-critical, precision components utilized by Fortune 100 companies in the aerospace and defence industries.

During its last quarter (Q3), the company experienced an unexpected outage of manufacturing equipment, which had a one-time negative impact on profitability (the problem has since been resolved). Combined with a lack of near-term catalysts or news, the stock has been drifting lower ever since.

Omni-Lite’s quarterly results tend to be somewhat lumpy, which makes predicting Q4 challenging. That said, at a C$16 million market cap with US$15.7 million in TTM revenue and US$1.7 million in TTM EBITDA, the valuation doesn’t appear too demanding.

The prior year Q4 was also the weakest of the last four quarters in terms of revenue and EBITDA, which should make for an easier comparison.

The company has facilities in both Canada and the US, generating over 70% of its revenues in the US, which makes it relatively insulated from tariffs. The push to domestic manufacturing in the US could actually be a favourable tailwind.

Lastly, the outlook for both the aerospace and defence industries is currently positive based on peers I’ve been following.

Overall, I feel like the market’s expectations are really low going into this quarter, and there’s a chance we might see an upside surprise.

Underdog to Watch: Rubicon Organics (TSX-V: ROMJ)

Rubicon Organics is a vertically integrated Canadian licensed producer of premium organic cannabis products.

If you’ve been following me lately, you're already aware that I’ve been a big fan of the Canadian cannabis industry, as investors have largely overlooked it. I’ve been finding what I consider high-quality names that are growing and profitable in what has been a very challenging environment.

Rubicon is one of those under-the-radar opportunities. It is coming off a robust third quarter that showed revenue growth of 34% with an adjusted EBITDA margin of 15%.

The stock is trading below tangible book value despite a solid operating performance. If the company can maintain this fundamental momentum, I think it will be challenging for the market to ignore.

The company will report on April 1 and will host a conference call the next day.

Tread Carefully: Biorem (TSX-V: BRM)

Biorem is an old favourite of mine and was one of our biggest winners in the Rivemont MicroCap Fund in 2024.

It is a cleantech company that designs, manufactures and distributes a comprehensive line of high-efficiency air emissions control systems used to eliminate odours, volatile organic compounds, and hazardous air pollutants.

Biorem’s quarterly revenues tend to be lumpy and unpredictable. The company reported an absolute monster quarter in Q3, with revenues up 170% year-over-year and net income up 336%. It was the best quarter in the company’s history, but the year-over-year comparison was relatively easy, given a soft quarter the prior year.

Now, this Q4, the company is up against its second-best quarter in history, with Q4 2023 revenue of $12.2 million and net income of $2.4 million.

The potential issue is that there’s a clue indicating this Q4 might not be as strong. The company discloses its backlog at the end of every quarter and occasionally intra-quarter when it announces new orders. On September 30, 2024, the backlog was $48.4 million. On December 9, 2024, the company announced $13 million in new orders, pushing the backlog to $58 million. If you do the math, the backlog should have been $61.4 million (48.4 + 13). To reach $58 million, you need to deduct $3.4 million, which has presumably been shipped to customers between September 30 and December 9. Considering the company presumably had $3.4 million in revenue with only three weeks left in the quarter, including the holidays, it seems likely that the quarter could be weak.

Building on the same analysis, the company announced $8 million in new orders on February 11, 2025, which increased its backlog to $60.5 million. The backlog should have been $69.4 million (48.4 + 13 + 8), meaning the company presumably delivered a little under $9 million between September 30 and February 11.

This is only speculation on my part, based on public disclosures, but it seems virtually impossible for the company to come anywhere close to its previous quarter's results. Even Q1 2025 could potentially be weak.

With all that being said, I like the company and its long-term growth prospects. Sometimes, lumpy quarterly results in microcap stocks can provide some of the best buying opportunities. I’m hoping for a knee-jerk market reaction on Biorem, which could provide a buying opportunity.

Beaten Down Wild Card Pick: CEMATRIX (TSX: CEMX)

CEMATRIX is a manufacturer and supplier of cellular concrete products. This unique cement-based material delivers cost-effective, innovative solutions to the infrastructure, industrial (including oil and gas) and commercial markets.

Similar to Biorem, the company has a substantial backlog of contracted projects scheduled for delivery over the next 12 to 24 months. However, CEMATRIX has been plagued by delays on a couple of large projects last year, which led to unexpected weakness in quarterly results and a likely decrease in full-year 2024 revenue.

As you might expect, investors rushed for the exits, resulting in a share price decline of over 65% since the company uplisted to the TSX in July 2024.

The risk/reward setup here looks quite interesting. At a market cap of about $25 million, you’re getting a profitable, debt-free company with $9.9 million of cash on the balance sheet, $29 million in tangible book value, and a $74 million order backlog.

The lone analyst who covers the stock (Beacon Securities) has the company trading at an expected 2025 EBITDA multiple of only 2.2 times!

I think these Q4 results might be the last of a string of disappointing quarterly results, allowing investors to look forward to improvements in 2025. This Q4 is likely not a needle-mover, but the change in outlook and sentiment might be what helps the shares recover now that all bad news is out of the way.

You won’t have to wait a long time on this one since the company reports tonight (March 26) and holds a conference call tomorrow.

That’s all I have for you this quarter! May your portfolio holdings report strong earnings.

What are some of the companies you'll be watching? Please let me know in the comments!

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Disclaimer

This publication is for informational purposes only. Nothing produced under the Stocks & Stones brand should be construed as investment advice or recommendations. Mathieu Martin, the author, is employed as a Portfolio Manager with Rivemont Investments. This publication only represents Mathieu Martin’s own opinions and not those of Rivemont. Rivemont may own positions and transact on any securities mentioned in this publication at any time without prior notice. At the time of this writing, the Rivemont MicroCap Fund holds shares of Omni-Lite Industries (TSX-V: OML) and Rubicon Organics (TSX-V: ROMJ). Always do your own research and consult a professional before making investment decisions.

If you’d like to invest in small public companies, check out this post.