Interline Brands, Inc. (IBI) has been able to grow its facility maintenance business even as it keeps one eye closely trained on economic trends. So far, this strategy is working as the company is expected to grow EPS by the double digits in 2012. This Zacks #1 Rank (Strong Buy) also is a value stock, with a really low price-to-sales ratio of just 0.5.
Interline Brands is a distributor and direct marketer of 20 brands of janitorial sanitation and maintenance, repair and operations products (“MRO”) to facility maintenance professionals, professional contractors and distributors in North America, Central America and the Caribbean.
It offers same-day or next-day delivery on products in its catalogs.
Interline Brands Surprised By 5.7% in Q3
On Nov 4, Interline reported its third quarter results and surprised on the Zacks Consensus by 2 cents a share. Earnings were 37 cents per share compared to just 34 cents in the year ago quarter.
Sales rose 19.7% to $331.3 million from $276.8 million in the third quarter of 2010 but most of that was due to acquisitions. On an organic basis, sales increased 3.7%.
The professional contractor end-market was the hottest, rising 6.6% for the quarter. The largest segment, the facilities maintenance end market which made up 77% of total sales, rose 3.5% on an organic basis.
Double Digit Earnings Growth Expected in 2012
The company saw “stability” in its end-markets in the third quarter but was keeping a close eye on broader economic trends.
Analysts were also keeping a tight grip on estimate revisions.
The 2011 Zacks Consensus Estimate hasn’t really budged in the last 3 months at $1.11 per share. It is EPS growth of 6.9% compared to 2010 where the company made $1.04.
But analysts have been getting a more bullish about the future. The 2012 Zacks Consensus Estimate rose 4 cents to $1.22 in the last month.
That is double digit earnings growth of 10.1%.
The company is scheduled to report fourth quarter results on Feb 24 so we’ll have a better idea about whether the end markets are still stable.
Value Fundamentals
Shares sold off during last summer’s sell-off but haven’t made a full rebound.
But because of that, there is plenty of value in the shares.
In addition to a P/S under 1.0, which usually indicates a company is undervalued, it also has a price-to-book ratio of 1.1.
A P/B under 3.0 can mean that a company is a “value”.
Interline Brand’s forward P/E isn’t exceptionally cheap at 14.1, but it is under the 15 cut-off I use for value stocks.
Interline Brands is a value stock with solid growth expected in 2012. Be sure to tune in in late February to see if the earnings picture is still as clear.
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 on twitter at traceyryniec.
