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John Bean Technologies Up 41% YTD: Will the Rally Continue?

Zacks Equity Research

John Bean Technologies Corporation JBT shares have surged 41.4% year to date, outperforming the industry's growth of 16.8%. Meanwhile, the Zacks S&P 500 composite has rallied 17.3% in the same timeframe.  An encouraging outlook for 2019 and focus on acquisitions, developing innovative products and expanding recurring revenue base is likely to drive the stock.

John Bean Technologies has a market capitalization of $3.2 billion. Average volume of shares traded in the last three months was 188.9K.

Let’s delve deeper and analyze the reasons behind the Zacks Rank #3 (Hold) stock’s impressive price performance and find out if there is room for further appreciation:

Upbeat Q2: The company’s second-quarter 2019 adjusted earnings per share improved 12% year over year to $1.42. Revenues of $493 million also improved 0.4% year over year. The company beat the Zacks Consensus Estimate on both the metrics.

Upbeat Guidance: For 2019, John Bean Technologies’ earnings per share guidance stands at $4.70-$4.90. Compared with earnings per share of $4.28 in 2018, the mid-point of the guidance range reflects growth of 12%. The company continues to expect organic growth of 4-5%. Acquisitions are now anticipated to contribute around 7% to growth.

Positive Earnings Surprise History: John Bean Technologies outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive earnings surprise of 28.79%.

Positive Earnings Growth Projections:  The Zacks Consensus Estimate for the company’s earnings for the ongoing year is currently pegged at $4.83, suggesting growth of 12.85% from the year-ago quarter. The same for 2020 stands at $5.35, indicating a year-over-year  improvement of 10.73%.The stock also has long-term expected earnings per share growth rate of 7.3%, higher than the industry’s growth rate of 5.5%.

Estimates Northbound: Earnings estimate revisions impact the stock prices significantly. The Zacks Consensus Estimate for John Bean Technologies’ current-year and the next-year earnings has moved up around 6% and 5%, respectively, over the past 90 days, reflecting analysts’ confidence in the stock.

Solid ROE: The company’s trailing 12-month ROE of 33.7% reinforces growth potential. The company's ROE is much higher than the industry’s 25.7%, highlighting the company's tactical efficiency in utilizing shareholders' funds.

Growth Drivers in Place: John Bean Technologies’ Elevate plan is likely to drive persistent growth and margin expansion. Per the plan, the company is focusing on accelerating development of innovative products and services to provide customers with solutions, which will enhance their yield and productivity.

The company is capitalizing on extensive installed base to expand recurring revenue (which accounts for around 40% of its revenues) from aftermarket parts and services, equipment leases, consumables and airport services. This portion of the business has been seeing a CAGR of 9% over the past three years. In fact, it has further room for growth and will contribute to the company’s margins.

John Bean Technologies has a strategic acquisition program focused on companies that add complementary products. Further, its ongoing restructuring plan will help improve effectiveness and productivity in all business units. Favorable industry trends in both segments and increased automation adoption among customers also bode well.

The company is poised to perform well in the long run, courtesy of growing middle class, increasing protein and value-added food and beverage consumption globally.

Stocks to Consider

Some better-ranked stocks in the Industrial Products sector are Atkore International Group Inc. ATKR, Cintas Corporation CTAS and Sharps Compliance Corp SMED, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Atkore International Group has a projected earnings growth rate of 19.8% for the current year. The stock has gained 58% so far this year.

Cintas has an estimated earnings growth rate of 12.74% for 2019. Shares of the company have rallied 59% year to date.

Sharps Compliance has an estimated earnings growth rate of 500% for 2019. The company has rallied 25% so far this year.

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