Is the Options Market Predicting a Spike in Hertz Global Holdings (HTZ) Stock?
Patrick Industries, Inc. PATK is scheduled to report third-quarter 2018 results on Oct 25, before the opening bell.
In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 17.36%. It surpassed estimates in all the last four quarters, with an average of 19.77%.
Let us take a look at the factors that have likely influenced this major manufacturer and distributor of building and component products for the recreational vehicle (“RV”), marine, manufactured housing, and industrial markets in third-quarter 2018.
Factors at Play
The company has been riding high on the back of industry growth, acquisitions as well as solid geographic-expansion efforts. In fact, it remains optimistic about the second half of 2018 as well, courtesy of solid end-market prospects. The company’s four primary markets (namely RV, marine, MH and industrial markets) are supported by strong industry fundamentals including favorable demographics, lifestyle and employment growth trends, high consumer confidence rate, credit availability as well as a healthy housing market, which supports its leverageable model based on slow and steady growth.
The company’s net sales increased 54% year over year in the first six months of 2018, supported by revenues from the RV industry, which represented 67% of its net sales, increasing 46% from a year ago.
Patrick Industries’ sales from the marine industry (representing 10% sales in the first six months of 2018) surged 167% from the prior-year level. Revenues from the MH industry (11% of sales) rose 39%, as wholesale unit shipments in this industry increased about 11% during the period. Again, revenues from the industrial market (12% of sales) increased 61%. The positive momentum is likely to have continued in the third quarter as well.
Additionally, the company continues to have an extremely strong pipeline of acquisitions, representing all its primary markets. It completed seven acquisitions through the first six months of 2018, accounting for approximately $322 million of annualized revenues.
Overall, for the third quarter, the Zacks Consensus Estimate for revenues stands at $565.2 million, reflecting a 38.7% year-over-year increase.
Encouragingly, Patrick Industries was able to expand gross margin (up more than 140 basis points year over year in the first six months of 2018), leveraging fixed costs and realizing synergies amid modest input-cost headwinds. Again, the company’s current business model and recent acquisitions have helped it generate robust operating cash flows, which will aid Patrick in supporting its strategic growth plans.
The consensus estimate for earnings is pegged at $1.04, implying 44.4% growth.
Patrick Industries, Inc. Price and EPS Surprise
Patrick Industries, Inc. Price and EPS Surprise | Patrick Industries, Inc. Quote
Here is What Our Quantitative Model Predicts:
Our proven model shows that Patrick Industries is unlikely to beat on earnings in the to-be-reported quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Patrick Industries currently has a Zacks Rank #3, which increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise.
Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
Here are some companies from the Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported:
Rayonier Inc. RYN has an Earnings ESP of +16.67% and carries a Zacks Rank #3. The company is slated to report quarterly numbers on Oct 31.
KBR, Inc. KBR has an Earnings ESP of +0.65% and a Zacks Rank #3. The company is expected to report quarterly results on Oct 30.
Jacobs Engineering Group Inc. JEC has an Earnings ESP of +5.25% and holds a Zacks Rank #3. The company is expected to report quarterly numbers on Nov 20.
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