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EnPro Industries (NPO) Tops Q4 Earnings, Ups Dividend by 9%

Zacks

EnPro Industries Inc. NPO reported better-than-expected results in the fourth-quarter 2017. Adjusted earnings came in at 67 cents per share, surpassing the Zacks Consensus Estimate of 65 cents by 3.1%.

Also, the bottom line in the quarter significantly increased over the year-ago tally of 15 cents.

For 2017, the company’s adjusted earnings were $2.30 per share, below the Zacks Consensus Estimate of $2.73. However, the result increased roughly 96.6% from $1.17, recorded in 2016.

Revenues Gain from Solid Business in Majority of End-Markets

In the fourth quarter, EnPro Industries’ net sales were $362.5 million, exceeding the Zacks Consensus Estimate of $348.1 million by 4.1%. Also, the top line grew 26.4% year over year on the back of strengthening of segmental sales. In addition, the company cited that acquisition (net of divestitures) and forex gains of 0.4% and 2%, respectively, impacted sales positively.

Business was strong in semiconductor, food & pharma, aerospace, nuclear, automotive, general industrial, metals & mining, oil & gas and heavy-duty trucking end markets. These positives were partially offset by weakness in industrial gas turbines markets.

The company reports its revenue results under three segments. A brief snapshot of segmental sales has been provided below:

Sealing Products revenues were up 27.2% year over year to $220 million. Engineered Products sales were $74.8 million, up 17.6% year over year. Sales in the Power Systems segment were $68.8 million, up 34.6% year over year.

For 2017, the company’s net sales came in at $1,309.6 million, increasing 10.3% year over year. However, the top-line came in below the Zacks Consensus Estimate of $1.39 billion.

Lower Proportion of Costs & Expenses Boosts Margins

EnPro Industries’ cost of sales grew 22% year over year in the fourth quarter and represented 66% of net sales, versus 68.4% recorded in the year-ago quarter. Gross margin increased 240 basis points (bps) to 34%. Selling, general and administrative expenses were $93.6 million, accounting for 25.8% of revenues.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter were $48.6 million, up 45.5% year over year, while adjusted EBITDA margin grew 180 bps year over year to 13.4%.

Balance Sheet & Cash Flow

Exiting the fourth quarter, EnPro Industries had cash and cash equivalents of $189.3 million, up from $176.1 million in the preceding quarter. Long-term debt increased 10.3% sequentially to $618.3 million.

In 2017, the company generated net cash of $46.6 million from its operating activities, down 27.8% from $64.5 million generated in the previous year. Cash used for the purchase of property, plant and equipment totaled $41 million, above $35.8 million in 2016.

During the year, the company paid approximately $19 million in dividend and repurchased shares worth $11.5 million.

In October 2017, the company’s board of directors approved $50 million worth share buyback program. The program is valid for a three-year period.

Dividend Rate Raised

Concurrent with the earnings release, the company announced that its board of directors has approved a 9% or 2 cents per share increase in its quarterly dividend rate. The revised dividend, now at 24 cents, will be paid on Mar 21, 2018, to shareholders of record on Mar 7.

Outlook

EnPro Industries anticipates benefiting from strengthening end-market conditions, solid product portfolio and healthy macroeconomic conditions. It projects sales growth to be within 3-5% range and adjusted EBITDA to be $216-$222 million in the year.

EnPro Industries Price, Consensus and EPS Surprise

EnPro Industries Price, Consensus and EPS Surprise | EnPro Industries Quote

Zacks Rank & Stocks to Consider

With a market capitalization of approximately $1.8 billion, EnPro Industries currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industry are Industrial Technologies, Inc. AIT, Dover Corp. DOV and Roper Technologies, Inc. ROP. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Industrial Technologies pulled off an average positive earnings surprise of 10.97% over the last four quarters. Also, earnings estimates for fiscal 2018 and fiscal 2019 were revised upward over the last 60 days.

Dover Corp. delivered an average positive earnings surprise of 7.26% in the trailing four quarters. Also, bottom-line expectations for 2018 and 2019 improved over the past 60 days.

Roper Technologies’ financial performance was impressive, with an average positive earnings surprise of 3.12% in the last four quarters. Also, earnings estimates for 2018 and 2019 were revised upward over the last 60 days.

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