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Encore Wire Upgraded to Strong Buy

Zacks Equity Research

On Aug 23, Zacks Investment Research upgraded Encore Wire Corporation (WIRE) to a Zacks Rank #1 (Strong Buy).

This electrical building wires and cables supplier has outperformed the Zacks Consensus Estimates in the last three quarters with an average magnitude of 40.8%.

Why the Upgrade?

On Jul 25, 2013, Encore Wire reported second quarter 2013 earnings of 75 cents per share, surpassing the Zacks Consensus Estimate by a robust 158.6%. Earnings growth was primarily driven by increased spread between the price of copper wire sold and the cost of raw copper purchased during the period.

The spread increased 18.1% in the second quarter from the prior-year quarter, while the copper unit volume shipped increased 8.1% year on year in the reported quarter. The copper spread expanded as the average price of copper purchased fell 8.3% year on year. However, the average selling price of wire sold fell only 2.1% as a result of improved pricing discipline in the industry.

Net revenue also surged 1.8% year over year to $554.8 million, driven by strong sales in the aluminum building wire sales, which contributed 6.1% to the top line. Copper unit volume increased 2.6% year over year. In addition, the company’s expanded product offerings across its business boosted its market share and the overall profitability.  

Following the earnings results, the estimates for Encore Wire showed an upward trend in the past 30 days. The Zacks Consensus Estimate for the third quarter of 2013 grew 60.7% to 45 cents as the sole estimate for the period was revised higher. Similarly, the estimate for the fourth quarter also increased 77.3% to 39 cents.  

The Zacks Consensus Estimate for fiscal year 2013 increased nearly 72.7% in the past 30 days to $1.90 per share, as the sole estimate for the period was revised higher. For fiscal 2014, the Zacks Consensus Estimate increased 38.4% to $2.63 over the last 30 days.

Other Stocks to Consider

The following companies with favorable Zacks Rank are also performing well and are worth considering.

1)         Rexnord Corporation (RXN) carries a Zack Rank #1 (Strong Buy)

2)         AO Smith Corp. (AOS) carries a Zack Rank #2 (Buy)

3)         Belden Inc. (BDC) carries a Zack Rank #2 (Buy)

Read the Full Research Report on AOS

Read the Full Research Report on BDC

Read the Full Research Report on WIRE

Read the Full Research Report on RXN

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