Shares of Myers Industries Inc. MYE climbed 9.5% on the index on Friday after the company reported better-than-expected first-quarter 2015 results and provided an encouraging outlook for the second half of 2015. Adjusted earnings per share from continuing operations of 13 cents surpassed the Zacks Consensus Estimate of 9 cents but fell 13.3% from the prior-year figure of 15 cents.
Though results benefited from strong performance of Scepter, it was offset by continued weakness in agricultural and food processing products sales.
Including one-time items, the company reported earnings of 8 cents a share from continuing operations, down 43.3% year over year.
Net sales surged 3.9% during the quarter to $156.3 million, benefiting from the acquisition of Scepter. However, net sales fell short of the Zacks Consensus Estimate of $159 million due to continued challenges in the agricultural end markets. Lower crop prices and decline in farm incomes have led to lesser demand for the company’s agricultural storage containers. Meanwhile, sale of food processing products fell as a major customer suspended orders.
Gross profit rose 8.8% to $45.8 million while gross margin expanded 130 basis points to 29.3%.
Segmental Information
The company’s Material Handling segment net sales increased 5.2% to $112.3 million on account of the Scepter buyout. Increase in sales was offset by dismal performance in the agricultural and food processing end market. Adjusted income prior to taxes increased 5.5% to $13.5 million.
Distribution segment sales declined marginally to $44.1 million from $43.9 million last year, mainly affected by the shutdown of the company’s Canadian outlets in the later part of first-quarter 2014, offset largely by organic sales growth of supplies and equipment in the U.S. Adjusted net income before tax decreased 12.2% year over year to $3.6 million.
Financial Updates
The company ended the quarter with $3.7 million in cash. Its long-term debt stood at $204.7 million and total shareholders’ equity came in at $119.5 million.
During the first quarter, the company repurchased $6.6 million worth of shares and still has 4.1 million shares remaining under the authorized buyback plan. Further, the company raised its quarterly dividend to 13.5 cents per share on Mar 6, 2015.
In the first quarter, Myers’ cash flow used for continuing operations was $20.5 million, while it incurred capital expenditure of $4.7 million.
For the full year, the company expects capital expenditures in the range of $25 to $30 million.
Going Forward
For the second quarter of 2015, Myers continues to expect soft earnings and sales due to continued weakness in some of its Material Handling end markets. However, it expects adjusted net income from continuing operations to improve from the first quarter driven by strength in operating results from Scepter along with the company’s planned cost reduction actions, product introductions and cross-selling initiatives.
Moreover, the company expects sales and earnings results for 2015 to improve from 2014.
Stocks to Consider
Myers currently has a Zacks Rank #5 (Strong Sell). Stocks to consider in the broader retail sector include Build-A-Bear Workshop Inc. BBW, Cabel’s Inc. CAB and Tractor Supply Company TSCO, all carrying a Zacks Rank #2 (Buy).
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