Twin Disc, Inc. (TWIN) looks like a bright spot in a weak market, still trading in elevated territory in spite of posting huge gains over the last two years. With an average earnings surprise of 93% over the last four quarters and bullish growth projection, this Zacks #1 rank stock is a solid industrial pick for momentum.
Company Description
Twin Disc, Inc. designs, manufactures and sells marine and heavy duty off-highway power transmission equipment. The company was founded in 1918 and has a market cap of $360 million.
Industrial companies have been strong out of the recession, with global economic growth fueling demand and driving earnings. That was on display on August 2 when TWIN reported strong Q2 results that came in well ahead of expectations.
Fourth-Quarter Results
Revenue for the period was up 52% from last year to $97 million. Earnings also came in strong at 66 cents, 23% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 93% over the last four quarters.
The good results were driven by demand out of the oil and gas industry, currently enjoying huge profits on high oil prices. Twin Disc also saw strong demand from the military, fire fighting and its marine customers.
Margins were also on the upswing, with gross margin expanding to 37.1% from 30.2% last year.
Financial Profile
Twin will also continue to benefit from its strong financial profile, with cash and short-term investments of $20 million against total debt of $27 million.
Estimates
We saw some pretty solid movement in estimates off the good quarter, with the current year adding 9 cents to $2.12. The next-year estimate is up 14 cents in the same time to $2.54, a bullish 19% growth projection.
Valuation
But in spite of the gains, the valuation picture still looks good, with a PEG ratio of .79, safely below the benchmark of 1 for value.
12-Month Chart
On the chart, shares hit a new 52-week high on the good quarter before recently pulling back with the market. Look for support from the long-term trend on any weakness, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Momentum Trader Service.
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