Sun Hydraulics (SNHY) is a Zacks #1 Rank (Strong Buy) after posting five of six positive earnings surprises.
Company Description
Sun Hydraulics Corporation, together with its subsidiaries, designs, manufactures, and sells screw-in hydraulic cartridge valves and manifolds used in hydraulic systems to industrial and mobile customers worldwide. Sun Hydraulics Corporation was founded in 1970 and is based in Sarasota, Florida.
SNHY Tops Expectations in Five of Last Six Quarters
Sun Hydraulics has beaten the Zacks Consensus Estimate in five of the last six quarters. In those five beats, the company has topped estimates by an average of more than 8%, and Wall Street has not really taken notice. Following the beats, the stock has moved by an average of 2%, but that includes negative moves of 10% and 5% in two of the quarters.
The 10% slide in the stock came following the September 2011 report where the company beat on the top and bottom lines. A 12% positive earnings surprise and a beat of $1 million on the top line was over shadowed by weak corporate guidance. As a result, investors sold shares.
Sun Hydraulics Most Recent Earnings Report
On March 12, 2012 the company reported revenue of $46 million roughly in line with the Zacks Consensus Estimate and higher than the $42 million reported in the year ago period. EPS of $0.24 was $0.04 lower than the Zacks Consensus Estimate or a 14% earnings miss. Following the report, the stock moved lower by 3%.
Next Earnings Report In May
un Hydraulics reports earnings again in mid-May. The Zacks Consensus Estimate is calling for $53 million in revenue and $0.39 of EPS. In the year ago quarter, the company reported revenue of $51 million, $4 million ahead of expectations and EPS of $0.38, roughly $0.07 or 24% ahead of the Zacks Consensus Estimate. As a result, the stock moved higher by more than 18% following the report.
Sun Hydraulics has a reasonable valuation despite trading slightly higher than the industry average for most of the commonly used metrics. A trailing twelve months PE of 16x is higher than the 12x industry average, while the forward PE of 15x shows a little more of a premium to the 10x industry average. Price to book comes in well above the industry average, but price to sales shows the largest premium. At 3x sales, Sun Hydraulics trades at a significant premium to the 0.75x industry average.
The Chart
A quick look at the recent price action for Sun Hydraulics shows the stock has had a round trip move from $24 to $33 and back again. In eliminating the gains the stock had made in 2012, the stock also was able to cross the 200 day moving average line, depicted below in red. This move brings the stock the bottom of edge of an up channel that stock has been in over the last months when a baseline low was created in October 2011. A return to positive earnings surprises will bring back positive attention to a stock that has a very reasonable valuation and a bounce off the lower end of the upward channel could be just what momentum investors are looking for. Sun Hydraulics is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service You can follow him at twitter.com/bbolan1
