Federal-Mogul Corp. (FDML) has pushed through a point of resistance thanks to a recent earnings report. The company, once again, topped expectations and analysts are raising estimates. Shares are up to Zacks #1 Rank (Strong Buy) and also trade with solid valuations.
Company Description
Federal-Mogul makes powertrain and safety solutions for the automotive, commercial, aerospace, marine, rail, agriculture and other equipment.
A Big Surprise
On Apr 28 Federal-Mogul reported its first quarter results that showed a 16% increase in sales, to $1.7 billion. Net income came in at $51 million, or $0.51 cents per share.
Income more than tripled from $15 million a year ago and the EPS was 15 cents better than the Zacks Consensus Estimate. Federal-Mogul has now topped forecasts in 5 of the past 6 quarters. This period also marked the eighth consecutive quarter of profitable results.
Estimates Pop
Analysts were happy with the results and quickly raised their full-year estimates, despite cutting them into the earnings number. The Zacks Consensus Estimate for 2011 is up 25 cents, to $1.93.
Next year’s average forecast jumped 13 cents, to $2.49. Federal-Mogul made $1.59 per share last year, so the projected growth rates are now 21% for this year and another 29% in 2012.
Valuations
Shares of FDML are trading hands at less than 14 times this year’s consensus estimate. The company also has a very reasonable P/S of 0.40 and P/B of 1.72 times.
The Chart
FDML was struggling against a level of resistance for over a month before anticipation of the earnings news allowed it to go higher. Fortunately, the results were solid and the stocks should be able to build upon this level.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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