Eddie Stobart Logistics - An attractive dividend yield with growth

Recent strategic acquisitions have transformed Eddie Stobart Logistics (ESL) into a full end-to-end logistics provider. This strategy has resulted in strong FY18 revenue (+35% y-o-y, of which +18% y-o-y organic growth) and earnings growth (EBIT +14% and EPS +15%), reflecting the strength of its pay-as-you-go model and its ability to achieve synergies. We expect ESL to focus on margin improvement and cash flow generation in FY19, and now forecast a 13% EPS CAGR in FY18-20. Following recent share price weakness, the stock offers a 6.4% dividend yield for FY18 with a 5% CAGR in FY18-20, on our updated estimates. ESL continues to trade at a large discount to logistics companies in the UK and Europe on P/E multiples.

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