Zacks Investment Research upgraded Belden Inc. BDC) to a Zacks Rank #1 (Strong Buy) on Apr 12, 2014. Going by the Zacks model, companies holding a Zacks Rank #1 have strong chances of performing better than the broader market.
Why the Upgrade?
Belden is an attractive investment option for investors seeking exposure to the wires and cables products industry. The company’s earnings grew nearly 10.5% in the past 5 years versus the meager 1.1% growth recorded for the industry.
Year to date, the company has yielded a positive return of 46.3%, while its share price grew 12.8% since the release of fourth-quarter 2013 results on Feb 5. Adjusted earnings per share of 91 cents in the quarter were 16.7% above the year-ago earnings of 78 cents. Also, the bottom-line result beat the Zacks Consensus Estimate of 90 cents. Revenues increased 6.7%, while gross margin increased 280 basis points to 34.3%.
For 2014, Belden projects net revenues to be within the $2.11−$2.15 billion range versus $2.07 billion revenues generated in 2013. Adjusted earnings per share are predicted to be within the $3.81−$4.11 range versus $3.69 recorded in 2013.
Also, along with the earnings release, Belden announced its offer to purchase Grass Valley for $220 million. The acquisition consummated on Apr 1 and is expected to be immediately accretive to adjusted earnings per share to the tune of 20 cents in 2014 and 50 cents in 2015.
Fourth-quarter 2013 results coupled with a strong outlook for 2014 and the Grass Valley acquisition triggered upward revisions in earnings estimates for Belden. In the last 60 days, the Zacks Consensus Estimate has increased 4.0% to $4.16 for 2014 and by 7.5% to $5.01 for 2015. The estimate also reflects year-over-year growth of 12.6% and 20.6% for 2014 and 2015 respectively. Earnings growth for the next 5 years is predicted to be 9.0%.
Solid earnings growth rates as well as a positive average earnings surprise of 2.1% have made us optimistic of a better performance ahead by Belden.
Other Stocks to Consider
Belden is a $3.1 billion company operating in the wires and cables industry. Other stocks worth considering in the sector include Kadant Inc. (KAI), Middleby Corp. (NASDAQ:MIDD)) and Komatsu Ltd. (6301.TOK) Ltd., all of which carry the same rank as Belden.