EnPro Industries, Inc. (NPO) reported weak results for the fourth quarter of 2013, with adjusted earnings of 46 cents a share dropping 22.0% year over year. However, adjusted earnings beat the Zacks Consensus Estimate of 44 cents by 4.5%. The year-over-year drop in earnings was primarily due to lower revenues and margins in the quarter.
On a GAAP basis, earnings per share were 22 cents, declining from 27 cents in the year-ago period.
For 2013, the company reported adjusted earnings per share of $2.39, compared with $3.07 per share in 2012. On a GAAP basis, earnings per share in the year were $1.17 compared with $1.90 per share in 2012.
Revenues: EnPro’s revenues for the quarter were $275.5 million, down from $279.3 million in fourth-quarter 2012. The year-over-year decrease in revenues was due to a reduction in the parts and service demand along with lower engine revenues in the company’s Engine Products and Services segment. The decline was partially offset by demand hike in Sealing Products and Engineered Products segments. However, revenues beat the Zacks Consensus Estimate of $269.0 million.
In 2013, EnPro generated revenues of $1.14 billion, compared with $1.18 billion in 2012.
Margins/Costs: Gross margin for the reported quarter decreased 150 basis points (bps) year over year to 31.1%. Selling, general and administrative (SG&A) expenses were $66.2 million, down from $68.0 million in the year-ago quarter. Adjusted earnings before interest, income taxes, depreciation and amortization for the reported quarter were $34.2 million versus $38.2 million in the year-ago quarter.
Segment Details: The Sealing Products segment’s revenues improved 7.3% to $152.5 million from $142.1 million in the fourth quarter of 2012. Operating margin for the segment was 15.7%, increasing 170 bps year over year.
Revenues from the Engineered Products segment increased 6.5% year over year to $85.4 million. The segment’s operating margin stood at 0.4% declining 110 bps from the year-ago quarter.
The Engine Products and Services segment generated revenues of $38.3 million compared with $57.4 million in the year-ago quarter. Operating margin for the segment was 1.3%, significantly down from 16.0% in the year-earlier quarter.
Balance Sheet/Cash Flow: Exiting the fourth quarter of 2013, EnPro’s cash and cash equivalents stood at $64.4 million, versus $75.1 million in the prior quarter. Long-term debt stood at $8.5 million, considerably lower from $36.3 million recorded in the preceding quarter.
For 2013, cash flow from operating activities was $61.7 million, declining from $118.2 million in recorded in 2012. EnPro incurred capital expenditure of $30.7 million in 2013, compared with $35.6 million in 2012.
Outlook: The company expects to see continued improvement in the Sealing Products and Engineered Products segment. However, demand in the Engine Products and Services is expected to remain low. With the increase in volumes and cost control initiatives undertaken, segment profits are expected to improve.
Other Stocks to Consider
EnPro currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the machinery industry include The Middleby Corporation (MIDD), Altra Industrial Motion Corp. (AIMC) and IDEX Corporation (IEX). While Middleby sports a Zacks Rank #1 (Strong Buy), Altra Industrial and IDEX hold a Zacks Rank #2 (Buy).
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