Lineage Prepares for First Post-IPO Earnings Report
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Lineage Inc.’s first quarterly report after raising $5.1 billion in the year’s biggest U.S. initial public offering will be a crucial test, as the temperature-controlled storage firm faces potentially weak demand for food supplies.
The bar is low for the $16-billion cold-storage real estate investment trust that has fallen 7% since its July IPO. Wall Street expects the company to report $1.3 billion in revenue and an adjusted diluted loss per share of $1.73 for the quarter that ended in September. Between a challenged U.S. consumer and lower volumes from food producers, cold-storage companies are battling several macro headwinds, according to RBC Capital Markets analyst Michael Carroll.
“Consumers are buying less food, but that’s nothing new,” Carroll said. “Volumes could be pointing toward a slightly better outlook, but those food producers are still working through this uncertain environment.”
Shifting data trends haven’t helped either. Recent statistics from the U.S. Department of Agriculture on food supplies held in cold-storage facilities have been bouncing around. The year’s figures started off weak but transitioned into a slight pickup over the past four to five months, Carroll said.
Lineage ranks No. 15 on the Transport Topics Top 100 list of the largest logistics companies in North America and No. 1 on the refrigerated warehousing sector list.
Shares of industrial REITs and warehouse owners have weakened in recent months as companies navigate that choppiness in demand. From Lineage’s IPO through close on Nov. 4, shares of its peer Americold Realty Trust Inc. are down 11%, while an index of industrial REITs has shed 7%.
Given Lineage’s recent transition from the private to public sector, Piper Sandler Cos. analyst Alexander Goldfarb said the emphasis is less on traditional metrics, like funds from operations, and more on the company’s growth story. Nearly 70% of Wall Street is bullish on the stock, with 11 analysts saying to buy, five to hold and none to sell.
“When a company goes through the process of switching from private to public, inevitably there’s gonna be some noise in the numbers,” Goldfarb said in an interview. “It’s hard to imagine a company coming out of the gate blowing out numbers, given that management was very focused on going through the IPO process.”
When Lineage reported some second-quarter financials with its stock launch four months ago, the metrics fell short of expectations, due in part to capital expenditures, Carroll said. Investors want to see some improvement in headline metrics and stabilization in fundamentals like occupancy and throughput, he said.
Ultimately, the company’s long-term growth story remains paramount. Lineage has a long history of peer acquisitions, including companies like Turvo, FrigoCare, VersaCold and Emergent Cold. While Wall Street isn’t expecting explicit acquisition pledges on the earnings call Nov. 6, analysts will be looking for more color on the broader transaction market and what management sees for the path ahead.
“Given management’s focus on the IPO, we wouldn’t be surprised to see an acquisition slowdown in the near-term,” Goldfarb wrote in a note to clients on Nov. 3. “While the pipeline may show no slowdown, we wouldn’t view this possibility as a negative or detracting from the story.”
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