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Graham (GHM) Completes Divestment of Energy Steel Business

Zacks Equity Research

Graham Corporation GHM yesterday announced that it successfully completed the divestment of its commercial nuclear utility business on Jun 24, 2019. The other party to the transaction was Hayward Tyler, a wholly-owned division of Avingtrans PLC. Financial terms of the transaction were kept under wraps.

Notably, Graham’s shares gained 0.1% yesterday, closing the trading session at $20.75.

Hayward Tyler is primarily engaged in developing and providing motors and critical pumps for customers in the energy sector. The firm has operations in India, China, the U.K. and the United States. It was established in 1815.

Brief Discussion on Divestment

It is worth mentioning here that prevailing challenges in the commercial nuclear industry made Graham decide to dispose of its commercial nuclear utility business — Energy Steel & Supply Co. As of Mar 31, 2019, the business was classified as ‘held for sale’ in Graham’s books.

Located in Lapeer, MI, Energy Steel generated revenues of $8.3 million in fiscal 2019 (ended March 2019).

This divestment will enable Graham to concentrate on other profitable businesses in defense, refining and petrochemical industries. Also, it will be accretive to the company’s margins and earnings.

With a market capitalization of nearly $204 million, Graham currently carries a Zacks Rank #4 (Sell). In the past 60 days, earnings estimates for the company have been lowered, reflecting bearish sentiments. The Zacks Consensus Estimate for its earnings is pegged at 54 cents for fiscal 2020 (ending March 2020) and 75 cents for fiscal 2021 (ending March 2021), suggesting decline of 32.5% and 25% from the respective 60-day-ago figures.

Graham Corporation Price and Consensus

Graham Corporation Price and Consensus

Graham Corporation price-consensus-chart | Graham Corporation Quote

In the past three months, Graham’s shares have gained 6% compared with 6.7% growth recorded by the industry.

Some better-ranked stocks in the industry are Roper Technologies, Inc. ROP, Chart Industries, Inc. GTLS and Flowserve Corporation FLS. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 30 days, earnings estimates for Roper and Chart Industries improved for the current year while remained stable for Flowserve. Further, average earnings surprise for the last four quarters was 8.43% for Roper, 16.56% for Chart Industries and 0.49% for Flowserve.

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