DXP Enterprises Closes Application Specialties Acquisition

DXP Enterprises, Inc. (NASDAQ:DXPE) yesterday announced that it has completed the acquisition of Application Specialties, Inc. Financial consideration of the buyout was not disclosed.

As noted, the buyout agreement was signed by the company on Jan 1.

Application Specialties is a distributor of abrasives, coolants, machine shop supplies and cutting tools. It primarily operates from three locations — Auburn, Everett and Vancouver, serving customers in the construction, medical, firearm and aerospace end markets. This Auburn, WA-based company was founded in 1989.

Synergistic Benefits From the Buyout

Application Specialties’ annual revenues were approximately $37 million while earnings before interest, tax, depreciation and amortization were roughly $2.9 million.

Addition of this asset will strengthen DXP Enterprises’ metal working business. It will expand the company’s product offerings and help in easy penetration into new markets, especially in the Pacific Northwest market of the United States. Addition of 33 skilled employees of Application Specialties will be an added benefit.

DXP Enterprises prefers to invest in acquisitions to gain access to new customers, regions and product line. From 2004 to 2016, the company successfully completed 33 acquisitions. Also, it believes in disposing non-core assets to enhance its business opportunities from the more profitable ones. In this regard, the divestment of Vertex Corporate Holdings, Inc. in October 2016 is worth mentioning.

Zacks Rank & Stocks to Consider

With a market capitalization of nearly $504 million, DXP Enterprises currently carries a Zacks Rank #5 (Strong Sell).

In a month’s time, DXP Enterprises shares have yielded 3.8% return, underperforming 4.3% gain recorded by the industry it belongs.

The negative sentiment is underpinned by downward revision in earnings estimates for the stock. Currently, the Zacks Consensus Estimate is pegged at 67 cents for 2017 (results not yet released) and $1.02 for 2018, reflecting 14.1% and 16.4% decline from their respective tallies 60 days ago.

DXP Enterprises, Inc. Price and Consensus