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Thermon Group (THR) Q3 Earnings Up Y/Y, FY18 View Solid

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Thermon Group Holdings, Inc. THR reported impressive results for third-quarter fiscal 2018 (ended Dec 31, 2018). The company’s adjusted earnings came in at 24 cents per share, increasing 50% from the year-ago quarter tally of 16 cents.

In November 2017, the company completed the acquisition of 100% equity stake in CCI Thermal Technologies Inc. and some related real estate assets. The acquired assets — now known as Thermon Heating Systems, Inc. — manufacture engineered heating and filtration solutions for use in the energy, petrochemical, electrical distribution, power, transit and industrial end markets.

Buyout and Forex Gains Drive Revenues

In the quarter, Thermon Group’s sales surged 44% year over year to approximately $92.7 million. The quarterly results benefited from roughly $16.1 million sales contribution from Thermon Heating Systems and from $3.1 million positive foreign currency translation.

Orders in the quarter grew 26% year over year to $105.3 million while quarter-end backlog of $167.7 million represented 60% increase from the year-ago quarter.

Margins Improve Y/Y

In the quarter, Thermon Group’s cost of sales jumped 41.2%, representing 54.4% of sales compared with 55.5% in the year-ago quarter. Gross margin improved 110 basis points (bps) to 45.6% on the back of favorable product mix and gains from projects.

Marketing, general and administrative and engineering expenses increased 30.5% year over year to $22.9 million. As a percentage of sales, these expenses were at 24.7%. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $21.6 million in the quarter, up roughly 72.1% year over year. Adjusted EBITDA margin came in at 23.3% versus 19.5% in the previous quarter.

Balance Sheet and Cash Flow

Exiting the fiscal third quarter, Thermon Group had cash and cash equivalents of $51.2 million, down from $83.4 million at the previous-quarter end. Long-term debt balance was $239 million versus $50.3 million in the fiscal second quarter.

In the quarter, the company used cash totaling $1.4 million for its operating activities versus net cash of $10.2 million generated in the year-ago quarter. Capital spending totaled $1.3 million, down 19.7% year over year.

View Up

For fiscal 2018 (ended Mar 31, 2018), Thermon Group anticipates gaining from end-market improvements and gains from Thermon Heating Systems. Orders rates and backlog are also anticipated to grow.

The company raised its organic revenue projection to the $258-$263 million range while reaffirmed sales projection from Thermon Heating Systems at $38-$41 million. Total revenues are now anticipated to be within $296-$304 million.

Thermon Group Holdings, Inc. Price, Consensus and EPS Surprise

Thermon Group Holdings, Inc. Price, Consensus and EPS Surprise | Thermon Group Holdings, Inc. Quote

Stocks to Consider

Thermon Group has a $725 million market capitalization and currently carries a Zacks Rank #3 (Hold). Some important players operating in the Zacks Computer and Technology sector are Badger Meter, Inc. BMI, Watts Water Technologies, Inc. WTS and iRobot Corporation IRBT. While both Badger Meter and Watts Water Technologies sport a Zacks Rank #1(Strong Buy), iRobot carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Badger Meter pulled off an average positive earnings surprise of 1.02% in the last four quarters. Also, earnings estimates for 2018 and 2019 were revised upward over the last 60 days.

Watts Water Technologies delivered an average positive earnings surprise of 3.66% in the trailing four quarters. Also, bottom-line expectations for 2018 improved over the past 60 days.

iRobot Corporations’ financial performance was impressive, with an average positive earnings surprise of 113.01% in the last four quarters. Also, earnings estimates for 2018 and 2019 were revised upward over the last 60 days.

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