DXP Enterprises (DXPE): Zacks Rank Buy

Zacks

DXP Enterprises, Inc.'s (DXPE) solid second quarter 2012 results and latest strategic acquisitions bode well for the future. This Zacks #1 Rank (Strong Buy) provider of MRO products, equipment and services has beaten the Zacks Consensus Estimate for 11 straight quarters with an average earnings surprise of 12.2%, and is nearing its 52-week high.

Upbeat Earnings and Strategic Acquisitions

On August 1, DXP Enterprises reported earnings per share of 80 cents, surpassing the Zacks Consensus Estimate by 2.6% and the year-ago earnings by 60%.

Net sales jumped 32% year over year to $261.9 million. All three segments performed well with revenue growth of 32% for Service Centers, 61% for Innovative Pumping Solutions and 17% for Supply Chain Services.

Acquisitions have been the company's strength for a long time. In the past few months, DXPE concluded a series of acquisitions, including that of Industrial Paramedic Services and HSE Integrated Ltd. The acquisitions will improve the company's medical services offering in Canada.

Based on its healthy second quarter 2012 results, DXP Enterprises remains optimistic about the remainder of 2012. Expansion of operating areas through acquisitions and growth offerings remains the prime aim of the company.

Earnings Momentum Moving Higher

The last 30 days have seen 2 of 4 estimates move higher for 2012, raising the Zacks Consensus Estimate by 1.3% to $3.20. For 2013, upward revisions from 3 of 4 estimates boosted the Zacks Consensus Estimate by 5.3% to $3.78.

The Zacks Consensus Estimates suggest year-over-year earnings momentum of 53.7% for 2012 and 18.1% for 2013.

Reasonable Valuation

Considering the company's growth prospects, its valuation looks reasonable on a P/B basis. It is currently trading at a P/B ratio of 3.8, up 16.3% from the peer group average of 3.3. In addition to P/B, the stock is also trading at a forward P/E of 14.1x, a P/S of 0.7 and offers a ROE of 26.3%, compared with the peer group P/E of 13.7x, P/S of 1.5 and ROE of 16.6%.

Also over the last 6 months, the company outperformed its prime competitor Applied Industrial Technologies, Inc. (AIT) as well as the S&P 500 and NASDAQ by wide margins.

DXP Enterprises is based in Houston, Texas, and was incorporated in 1996. The company caters to the needs of its industrial customers by providing maintenance, repair and operating (MRO) products, equipment and services. Prospects look bright for the shares to trade higher. The stock currently has a market capitalization of roughly $639 million.

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