DXP Enterprises, Inc. (NASDAQ:) currently seems to be a smart choice for investors seeking exposure in the manufacturing space. Solid fundamentals and positive revision in earnings estimates are reflective of healthy growth potential of the stock.
This Houston, TX-based company currently sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of B. It belongs to the Zacks Manufacturing – General Industrial industry, which belongs to the broader Zacks Industrial Products sector.
We believe that technological advancement in manufacturing processes, investments in infrastructural development, growth in construction and remodeling activities, and favorable changes in tax policies have been benefiting the industry.
Below we discussed why investing in DXP Enterprises will be a smart choice.
Impressive Financial Performance and Earnings Outlook: DXP Enterprises’ solid financial performances — with a positive average earnings surprise of 46.55% — have been beneficial in building positive sentiments for the stock.
It is worth mentioning here that the company delivered earnings beat of 50% in the fourth quarter of 2018. Its share price has increased roughly 38.4% since the release of results on Mar 7, 2019, outperforming the industry’s growth of 9.2%.
DXP Enterprises anticipates that organic growth opportunities, strong cash generation, healthy balance sheet and geographically diversified businesses will be advantageous in the quarters ahead.
In the past 60 days, earnings estimates for the company have been revised upward, reflecting optimism about its growth prospects. Currently, the Zacks Consensus Estimate for earnings stands at $2.36 for 2019, reflecting growth of 5.8% from the 60-day-ago tally. This estimate reflects year-over-year growth of 21.7%.
DXP Enterprises, Inc. Price and Consensus
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DXP Enterprises, Inc. Price and Consensus | DXP Enterprises, Inc. Quote
Growth Tailwinds: DXP Enterprises seems better positioned than other players in the industry. Its solid footprints in various end markets — including upstream, midstream, downstream, food & beverage, industrial, chemical, and other — as well as geographically diversified businesses are boons.
Also, the company strongly believes in providing customized maintenance, repair, operating and production solutions to customers. Its solid product portfolio, supercenters, technical sales and marketing capabilities, and integrated supply model adds to the investment appeal.
All these tailwinds help the company to better serve customers through three segments — Service Centers, Innovative Pumping Solutions and Supply Chain Services. The Zacks Consensus Estimate for revenues for DXP Enterprises is pegged at $1.31 billion for 2019 and $1.37 billion for 2020, reflecting year-over-year growth of 7.6% and 4.6%, respectively.
Acquisitive Nature: Over time, the company fortified the product portfolio and leveraged business opportunities through the addition of assets.
Notably, it acquired Application Specialties, Inc. — which provides machine shop supplies, cutting tools, coolants and abrasives — in 2018. Since then, the acquired assets have been strengthening the company’s metalworking business.
Debt Profile: DXP Enterprises’ long-term debt at the end of the fourth quarter of 2018 was approximately $237 million, down 0.7% from the balance at the end of 2017. Moreover, the company’s debt profile is better compared with the industry. Its debt/equity of 76.9% is lower than the industry’s 84%.
Other Stocks to Consider
Some other top-ranked stocks in the industry are Chart Industries, Inc. (NASDAQ:) , Sun Hydraulics Corporation (NASDAQ:) and Roper Technologies, Inc. (NYSE:) . All these stocks currently sport a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for all these three stocks have improved for the current year. Further, average earnings surprise for the last four quarters was positive 23.60% for Chart Industries, 2.27% for Sun Hydraulics and 4.96% for Roper.
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