DXP Enterprises, Inc. DXPE currently seems to be a smart choice for investors seeking exposure in the manufacturing space. Solid fundamentals and positive revision in earnings estimates are reflective of healthy growth potential of the stock.
This Houston, TX-based company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of A. It belongs to the Zacks Manufacturing – General Industrial industry, which belongs to the broader Zacks Industrial Products sector.
Tailwinds — including investments in infrastructural development, favorable changes in tax policies, technological advancement in manufacturing processes, and growth in construction and remodeling activities — are beneficial for the industry players.
Below we discussed why investing in DXP Enterprises will be a smart choice.
Share Price Performance, Earnings Projections: Market sentiments seem to be working in favor of the company over time. Year to date, its share price has gained 16.1%, higher than the sector’s growth of 5.9%.
We believe that impressive financial results helped in driving sentiments for the stock. The company beat earnings estimates in two of the last three quarters (results reported so far in 2019) and meet the same once. Average earnings surprise for DXP Enterprises was a positive 18.1% for these three quarters. Notably, earnings surprise was 4.29% in the last reported quarter.
In the quarters ahead, the company believes that strengthening end markets as well as its solid execution capabilities will be boons. These along with focus on investing in growth opportunities will be advantageous for its top and bottom-line growth.
Further, the company’s earnings estimates have been raised in the past 30 days. The Zacks Consensus Estimate for its earnings is pegged at $2.39 for 2019, reflecting 0.8% growth from the figure mentioned 30 days ago.
DXP Enterprises, Inc. Price and Consensus
DXP Enterprises, Inc. price-consensus-chart | DXP Enterprises, Inc. Quote
Top-Line Strength: The company’s highly engineered products — including industrial supplies, rotating equipment, bearing & power transmission, and others — as well as value-added services place its well for growth. Also, efficient marketing capabilities and integrated supply model are boons.
Moreover, presence in various end-markets like upstream, midstream, downstream, transportation; agriculture; food & beverage; and chemical among others is a boon. Such diversification helps in strengthening its customer base and reduces concentration risks.
The Zacks Consensus Estimate for DXP Enterprises’ revenues is pegged at $1.31 billion for 2019 and $1.37 billion for 2020, reflecting year-over-year growth of 7.3% and 4.8%, respectively.
Buyouts: Over time, the company fortified the product portfolio and leveraged business opportunities through the addition of assets. Though no acquisition has been made so far in 2019, the company’s metalworking business is benefiting from the buyout in 2018 of Application Specialties, Inc. — a provider of cutting tools, machine shop supplies, coolants and abrasives.
Debt Profile: DXP Enterprises’ long-term debt at the end of the second quarter of 2019 was approximately $236.2 million. Moreover, the company’s debt profile is better than the industry. Its debt/equity of 87% is lower than the industry’s 103%.
Other Key Picks
Some other top-ranked stocks in the industry are Graham Corporation GHM, Roper Technologies, Inc. ROP and Dover Corporation DOV. While Graham sports a Zacks Rank #1 (Strong Buy), both Roper and Dover carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for these stocks have improved for the current year. Further, earnings surprise for the last reported quarter was 100% for Graham, 0.99% for Roper and 0.65% for Dover.
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