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EnPro Divests Fairbanks Morse Business to Arcline for $450M

Zacks Equity Research

EnPro Industries, Inc. NPO recently completed its earlier announced divestment of the Fairbanks Morse business to private equity firm Arcline Investment Management for $450 million in cash. As noted by the company, this marks an important development for its ongoing portfolio restructuring initiatives.

Fairbanks Morse was part of EnPro’s Power Systems segment prior to the divestment. It is a leading provider of large, complex power systems to the U.S. military.

The divestment of the business will enable the company to focus more on its core businesses. Also, EnPro is likely to utilize the net proceeds from the sale for paying down some of its outstanding debt apart from using it for strategic buyouts and share repurchase programs.

Other Inorganic Moves

Some other notable inorganic activities completed by EnPro are the sale of part of its STEMCO heavy-duty truck business in Rome, GA in September 2019. The same month, the company also completed the buyout of Taiwan-based, LeanTeq Co., Ltd, which became part of its Sealing Products segment. In July 2019, the company also acquired The Aseptic Group, a manufacturer and distributor of aseptic fluid transfer products serving the pharmaceutical and biopharmaceutical industries.

Zacks Rank & Price Performance

EnPro, which has a market cap of roughly $1.4 billion, currently carries a Zacks Rank #5 (Strong Sell). In the past three months, the company’s shares have lost 6.4% against the industry’s growth of 11%.

Analysts have become increasingly bearish about the company over the past 60 days. Its earnings estimates for 2019 have decreased from $3.97 to $2.69 on account of two downward estimate revisions versus none upward. In addition, the Zacks Consensus Estimate for 2020 has gone down from $4.20 to $2.88.

Stocks to Consider

Some better-ranked stocks from the same space are DXP Enterprises, Inc. DXPE, IDEX Corporation IEX and Parker-Hannifin Corporation PH. While DXP Enterprises sports a Zacks Rank #1 (Strong Buy), IDEX and Parker-Hannifin carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises delivered positive earnings surprise of 17.67%, on average, in the trailing four quarters.

IDEX pulled off positive earnings surprise of 3.26%, on average, in the trailing four quarters.

Parker-Hannifin delivered positive earnings surprise of 5.29%, on average, in the trailing four quarters.

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