EnPro Stumbles on 1Q13 Earnings

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Machinery company, EnPro Industries, Inc. (NPO) posted dismal results for the first quarter 2013, ended Mar 31, 2013. EnPro posted adjusted earnings per share of 39 cents, plunging 39.1% year over year. Earnings also missed the Zacks Consensus Estimate of 73 cents by 46.6%, resulting from lower revenues in the quarter.

Revenue: EnPro’s revenue in the reported quarter was $286.9 million, compared with $311.5 million in the first quarter of 2012. Revenue missed the Zacks Consensus Estimate of $292.0 million by 1.7%. The decline in revenue was due to demand reduction in EnPro’s industrial markets as well as lower selling prices of new engines.

Costs/Margins: Gross margin for the reported quarter dropped 158 basis points year over year to 32.8%. SG&A expenses were recorded at $72.6 million, against $73.5 million recorded in the year-ago quarter. Adjusted EBITDA fell to 12.6%, declining 230 basis points year over year.

Segment Details: Sealing Products recorded revenue of $146.6 million, compared with $149.5 million in the first quarter of 2012. Operating margin for the segment was recorded at 14.5%, decreasing 60 basis points year over year.

Revenue from Engineered Products was $91.8 million, against $100.6 million in the year-ago quarter. Segment’s operating margin stood at 6.3%, 260 basis points down from the quarter ended Mar 31, 2012.

Engine Products and Services generated revenue of $49.4 million, while the revenue generation in the year-ago quarter was $62.0 million. Operating margin for the segment was 9.7%, against 19.0% in the year-ago quarter.

Balance Sheet/Cash Flow: Exiting the first quarter of 2013, EnPro’s cash and cash equivalents stood at $48.5 million, decreasing $5.4 million sequentially. Long-term debt for the company was recorded at $57.1 million, against $184.3 million recorded in the preceding quarter.

Cash flow used in operating activities in the quarter was $17.8 million, against a cash generation of $3.4 million in the year-ago quarter. Capital expenditure incurred in the quarter was $9.8 million, compared with $5.5 million in the first quarter of 2012.

Outlook: Based on seasonality, management expects revenue generation in the second quarter of 2013 to improve sequentially. This, coupled with the cost saving initiatives undertaken by the company, is believed to increase the profits and margins of EnPro.

EnPro currently carries a Zacks Rank #1 (Strong Buy). Other stocks worth a look in the industry are Graco Inc. (GGG), Omnitek Engineering Corp. (OMTK) and Tri-Tech Holding, Inc. (TRIT); each carrying a Zacks Rank #1 (Strong Buy).

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