Thermon Beats on Q3 Earnings, Lags on Rev

Zacks

Thermon Group Holdings, Inc. (THR) reported improved year-over-year earnings for the third quarter of fiscal 2014 (ended Dec 31, 2013). Adjusted earnings per share in the quarter came in at 37 cents, up 54.2% year over year and a cent above the Zacks Consensus Estimate of 36 cents. The hike in earnings was mainly a result of increase in the margins.

On a GAAP-basis, earnings per share were 39 cents, up from 24 cents in the year-ago comparable quarter.

Revenues

Thermon Group generated revenues of $71.5 million in the fiscal third-quarter 2014, down 7.0% year over year. The decrease can be attributed to a decline in Greenfield activity in Asia and Canada. Moreover, foreign currency transactions negatively impacted revenues by $1.2 million, primarily due to weakness in the Canadian dollar. Reported revenues also missed the Zacks Consensus Estimate of $82.0 million comprehensively. 

Exiting fiscal third-quarter 2014, Thermon Group had a backlog of $90.5 million compared with $91.8 million at the end of fiscal second-quarter 2014.

Margins

Cost of sales in fiscal third-quarter 2014 decreased 15.4% year over year and represented 49.5% of total revenue, down from 54.5% in the year-ago quarter. Gross margin increased 500 basis points year over year to 50.5% on the back of hike in the maintenance, repair, operations/upgrade and expansion revenues.

Marketing, general and administrative and engineering expenses of Thermon group, as a percentage of total revenue, stood at 20.8%. Adjusted earnings before interest, taxes, depreciation and amortization in the quarter were $21.9 million, up from $18.9 million in the year-ago quarter.

Balance Sheet

Exiting fiscal third-quarter 2014, cash and cash equivalents of Thermon Group were $67.3 million, up 26.0% sequentially. Long-term debt, net of current portion, decreased 3.0% to $111.4 million.

Cash Flow

Thermon Group’s net cash flow generation from operating activities were up 58.4% year over year to $19.5 million. Capital spending on purchase of property, plant and equipment was $973,000, up from $2.4 million in the comparable quarter a year ago.

Other Stocks to Consider

Thermon Group currently has a market capitalization of $835.6 million and carries a Zacks Rank #3 (Hold). Some better-ranked stocks to watch out for in the industry include Watts Water Technologies, Inc. (WTS), Graco Inc. (GGG) and Kaman Corporation (KAMN). All these stocks carry a Zacks Rank #2 (Buy).

Read the Full Research Report on GGG
Read the Full Research Report on THR
Read the Full Research Report on KAMN
Read the Full Research Report on WTS


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