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Reasons Why it is Worth Investing in EnPro (NPO) Stock Now

EnPro (NPO) is to benefit from healthy end markets, economic recovery, gains from buyouts and divestments, and diversified operations. Rewards to shar...

This story originally appeared on Zacks

EnPro Industries, Inc. NPO can be an attractive investment option for investors seeking exposure in the manufacturing industry. Its solid fundamentals, growth prospects and healthy financial performances add to its appeal.

It engages in manufacturing and providing engineered industrial products, including tubing, hygienic seals, compression packing products, hydraulic components and pipeline casing spacers. The company currently has a market capitalization of $1.8 billion and a Zacks Rank #2 (Buy).

It belongs to the Zacks Manufacturing - General Industrial industry, which comes under the ambit of the Zacks Industrial Products sector. The industry is among the top 30% (with the rank of 76) of more than 250 Zacks industries.

Year to date, the company’s shares have gained 13.2% compared with the industry’s growth of 11.3%. Notably, the S&P 500 expanded 21.8% and the sector advanced 15.5% in the same timeframe.

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Below we discussed why EnPro is a worthy investment option.

Performance and Earnings Projections: The company delivered better-than-expected results in the last four quarters, the average surprise being 80.64%. Last quarter, the company’s earnings beat the Zacks Consensus Estimate by 25.81% and sales surpassed the same by 9.48%. On a year-over-year basis, revenues grew 20.9% and adjusted earnings increased 77.3%.

In the quarters ahead, the company is poised to benefit from its solid product offerings, strengthening end markets and economic recovery. Its organic growth investments and healthy balance sheet are other tailwinds. For 2021, the company increased its earnings per share projection to $5.16-$5.50 from the previously mentioned $4.74-$5.08. The increase is backed by improved sales projection and a healthy operational performance.

Diversified Operations: The company operates in various markets, including metals and mining, semiconductor, general industrial, auto, petrochemical, power generation, aerospace, and others. Benefits in one or more markets help in offsetting weakness in other markets. For the second half of 2021, the company anticipates strength across major markets.

For 2021, it anticipates sales of $1.075-$1.125 billion as compared with $1.05-$1.10 billion mentioned previously.

Inorganic Actions: EnPro has been strengthening/reshaping its businesses by acquiring businesses and disposing of non-core businesses over time. The company’s important divestments in the past few quarters include the sale of bushing block business, STEMCO’s Air Springs business, Crewson brake adjuster and Motor Wheel brake drum businesses, and Fairbanks Morse.

Talking about acquisitions, EnPro added Santa Rosa, CA-based Alluxa, Inc. to its portfolio. The latter specialized in making and providing thin-film coatings, and optical filters for use in life sciences, industrial technology and semiconductor markets.

In the first half of 2021, EnPro invested $2.3 million in making acquisitions.

Shareholders’ Rewards: the company believes in rewarding shareholders with dividend payouts. In the first half of 2021, it paid out $11.3 million as dividends to its shareholders. The quarterly dividend rate was hiked by 4% to 27 cents per share in February 2021.

It refrained from repurchasing shares in the first half of 2021 but bought back shares worth $5.3 million in the year-ago period. It has the authorization left to buy back $50 million shares under its October 2020 approved program) at the end of June 2021.

Earnings Estimate Revisions: The company’s earnings estimates have increased in the past 60 days. Currently, the Zacks Consensus Estimate for earnings is pegged at $1.32 for the third quarter of 2021, reflecting an increase of 9.1% from the 60-day-ago figure.

Also, earnings estimates are pegged at $5.47 for 2021 and $6.03 for 2022, suggesting increases of 10.3% and 7.7% from the 60-day-ago figures, respectively.

Other Key Picks

Some other top-ranked stocks in the industry are Kadant Inc. KAI, Applied Industrial Technologies, Inc. AIT and Dover Corporation DOV. While Kadant currently sports a Zacks Rank #1 (Strong Buy), both Applied Industrial and Dover carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for the companies improved for the current year. Further, the earnings surprise for the last reported quarter was 33.11% for Kadant, 27.97% for Applied Industrial and 11.96% for Dover.

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