Looking for a way to play the hot shale trade? Gardner Denver, Inc. (GDI) recently beat the Zacks Consensus Estimate for the 8th straight time after posting record quarterly results. This Zacks #1 Rank (strong buy) has both growth and value with a PEG ratio of just 0.8.
Gardner Denver manufactures highly engineered products including reciprocating, rotary and vane compressors, liquid ring pumps and blowers for various industrial and transportation applications.
It also makes pumps used in the petroleum and industrial market segments, and other fluid transfer equipment serving chemical, petroleum, and food industries.
Record Quarterly Results
On July 21, Gardner Denver reported second quarter results and beat the Zacks Consensus by 5.8%. Earnings per share were a record at $1.27 compared to the consensus of $1.20. This was an increase of 79% compared to the 71 cents made in the second quarter of 2010.
Revenue rose 36% to a record $610.7 million. Orders were also a record, up 27% to $637 million.
The Industrial Products Group benefited from organic growth in North America and Asia Pacific. The Engineered Products Group saw strong demand for petroleum pumps and related aftermarket parts and services.
Raised Full Year Guidance
Gardner Denver is optimistic about the rest of 2011. The backlog, as of June 30, was at an all-time high at $681.7 million.
The company is also benefiting from the hot shale oil play. Demand for well servicing pumps and aftermarket fluid ends is expected to grow sharply due to high shale activity.
Emerging market growth is also forecast to stay strong through the end of 2011.
As a result, Gardner Denver raised its full year outlook to the range of $5.05 to $5.15 per share from its prior guidance of $4.60 to $4.70.
Zacks Consensus Estimates Pop
Not surprisingly, the analysts are just as bullish as the company (if not more so.) The 2011 Zacks Consensus Estimate rose to $5.35 from $4.90 since the earnings report, which is 15 cents above the company’s guidance.
That is earnings growth of 57.8% compared to 2010 as the company only made $3.39 a share last year.
2012 is also looking up with the Zacks Consensus rising to $6.25 from $5.67 per share over the last month.
That is further earnings growth of 17%.
Shares Pullback: Is It a Buying Opportunity?
After two years of the shares marching endlessly higher, the recent stock market pullback has meant shares of Gardner Denver have fallen sharply in a short period of time.
Shares have more attractive valuations after the pullback.
The forward P/E is 14.2 which is under the 15x cut-off I use for “value” stocks.
It also has a price-to-book ratio of 2.9, which is under the 3.0 parameter usually used for value.
The company also rewards shareholders with a dividend, although it is yielding just 0.2% at this time.
Gardner Denver is a stealth play on the hot shale market. It has the powerful combination of both double digit earnings growth and attractive valuations.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.
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