Jinpan International Limited (JST) reported fourth quarter earnings on Mar 15 and surprised on estimates for the third quarter in a row even as sales declined.
Headquartered in China, with U.S. offices in New Jersey, Jinpan manufactures cast resin transformers for high voltage distribution equipment.
The company’s medium voltage transformers are used in large infrastructure projects such as factories and real estate developments and in municipal projects like airports and subway systems.
Fourth Quarter 2009 Results
Sales fell 7.1% to $41.7 million from $44.9 million in the fourth quarter of 2008.
The sales decline was expected and was the result of a downward pressure on raw material prices passed onto customers in the form of lower unit prices.
Sales also fell outside of China by 70% to $2 million. The result is that total international sales declined to just 4.8% of total sales compared to 15.8% of total sales in the fourth quarter of 2008.
Jinpan blamed the decline in a larger percentage of sales shipped in the first three quarters compared to 2008 where there was 36% of total international sales shipped in the fourth quarter.
For the full year, total sales rose 3.2% over 2008.
The company didn’t parse out the percentage of international sales for the year. Why not?
It would have given investors a better indication of whether the fourth quarter drop was simply a one time event due to a change in shipping patterns as the company said or the start of a real slowdown in the international segment.
2010 Outlook
Jinpan was still optimistic about 2010, forecasting a sales increase of about 10% to 15% compared to 2009. It expects to see greater shipping volume in 2010 but at slightly lower sales cost due to competitive pressures pertaining to lower raw material prices.
Cast resin transformer sales are expected to be the driving force for the year, at 75% to 80% of total sales. Wind power applications should amount to the other 20% to 25% of sales.
2010 Zacks Consensus Estimate Jumped
After the earnings report, 1 estimate moved higher for 2010 which pushed up the Zacks Consensus to $1.83 from $1.70 per share.
The 2 covering analysts are bullish on Jinpan, with both ranking the company a strong buy.
Value Fundamentals
Jinpan is still trading with excellent value credentials. Its forward P/E ratio is just 12.1, well within the value range. It has a price-to-book ratio of 2.7.
The company also sports a PEG ratio of only 0.6, which is under 1.0 and designates a stock that is undervalued.
Jinpan also pays a dividend, with a yield of 0.6%. It is rare for a smaller Chinese-based company to pay a dividend. The industry average dividend is zero.
Jinpan is now a Zacks #2 Rank (stock) but was a Zacks #1 rank when I last reviewed it on Nov 25, 2009.
Read the Nov 25, 2009 article.
Update to Previous Value Zacks Rank Buy Stocks
China Biologic Products, Inc. (CBPO) recently reported record revenue for the fourth quarter and 2009. The stock is cheap, trading at just 7.8x forward earnings. Read the full article.
Gentiva Health Services, Inc. (GTIV) grew revenue in 2009 as it focused on its home health and hospice segments. The company is cheap, with a forward P/E of 11.3. Read the full article.
Cato Corporation (CATO) is one of those value retailers which is seeing strong sales as consumers return to the shopping mall. Read the full article.
Autoliv Inc. (ALV) is hitting new 52-week highs but the stock isn’t altogether expensive. It is trading at just 12.4x forward earnings which makes it a value stock and puts it well below the average of the S&P 500. Read the full article.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
