EnPro Industries, Inc. (NPO) reported weak third-quarter 2013 results with adjusted earnings of 53 cents a share dropping 34.6% year over year. Adjusted earnings also missed the Zacks Consensus Estimate of 77 cents by 32.1% primarily due to lower revenues and margins in the quarter.
On a GAAP basis, earnings per share was 23 cents in the quarter, declining from 53 cents in the year-ago period.
Revenues: EnPro’s revenues for the quarter were $276.0 million, down from $291.7 million in third-quarter 2012. The year-over-year decrease in revenues was due to reduced parts and service demand in the U.S. government markets. In addition, revenue boost from acquisitions was offset by negative impacts of foreign currency transactions. Revenues comprehensively missed the Zacks Consensus Estimate of $293.0 million.
Margins/Costs: Gross margin for the reported quarter decreased 50 basis points (bps) year over year to 33.4%. Selling, general and administrative (SG&A) expenses were $71.4 million, up from $68.8 million in the year-ago quarter. Adjusted earnings before interest, income taxes, depreciation and amortization (:EBITDA) for the reported quarter were $36.0 million versus $44.5 million in the year-ago quarter.
Segment Details: The Sealing Products segment’s revenues improved slightly to $157.9 million from $152.4 million in the third quarter of 2012. Operating margin for the segment was 15.3%, decreasing 20 bps year over year.
Revenues from the Engineered Products segment declined 3% year over year to $84.1 million. The segment’s operating margin stood at 3.4% – a 60 bps decrease from the year-ago quarter.
The Engine Products and Services segment generated revenues of $34.9 million compared with $53.1 million in the year-ago quarter. Operating margin for the segment was 6.6%, significantly down from 19.6% in the year-earlier quarter.
Balance Sheet/Cash Flow: Exiting the third quarter of 2013, EnPro’s cash and cash equivalents stood at $75.1 million, increasing considerably from $58.2 million in the prior quarter. Long-term debt stood at $36.3 million, versus $48.6 million recorded in the preceding quarter.
For the nine months ended Sep 30, 2013, cash flow from operating activities was $38.1 million, declining from $55.9 million in the year-ago comparable period. In the first nine months of 2013, EnPro incurred capital expenditure of $21.9 million, compared with $20.4 million in the first nine months of 2012.
Outlook: The company expects European market demand to improve year over year in fourth-quarter 2013. Additionally, demand from North American original equipment markets is also forecasted to be higher than the year-ago quarter. The increased sales of low margin original equipment are expected to hamper operating profits. However, sales revenues are predicted to be greater than the year-ago quarter.
Other Stocks to Consider
EnPro currently carries a Zacks Rank #3 (Hold). Other stocks worth considering in the industry are Flowserve Corp. (FLS), Graham Corp. (GHM) and IDEX Corporation (IEX). All these carry a Zacks Rank #2 (Buy).