by Zacks Equity ResearchJanuary 09, 2013 | Comments : 0 Recommended this article: (0)
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The expected long-term earnings growth rate for this Zacks #1 Rank (Strong Buy) is 21.2%. Earnings estimates have been advancing, leading to significantly higher year-over-year growth rates for fiscal 2013 and fiscal 2014.
Fiscal Second Quarter
On October 29, Eagle Materials reported fiscal second quarter (ended September 30, 2012) earnings of 49 cents per share, which topped the Zacks Consensus Estimate by 4.26% and soared 250.0% from last year. This performance was driven mainly by wallboard pricing gains, higher volumes in all lines of business and lower recycled fiber input costs.
Net sales rose 22% to $165.0 million. The companys principal lines of business are cement and gypsum wallboard. Gypsum Wallboard revenue grew almost 52% in the quarter with volumes increasing 24% and the average selling price rising 30%. Cement revenue grew 8%, also gaining from positive volume and price growth.
Eagle Materials will report its fiscal third quarter results on January 29. The Zacks Consensus Estimate at the moment is 43 cents per share. With a good Zacks Rank and Earnings ESP of 4.7%, Eagle Materials looks poised to beat the Zacks Consensus Estimate in the quarter.
The company has bright prospects ahead thanks to an improving end-market outlook, cost reduction efforts and an acquisition-based growth strategy. Moreover, late last years acquisition of two cement plants from Lafarge North America is expected to increase Eagle Materials cement capacity by approximately 60%, thereby allowing it to take advantage of the U.S. construction industrys recovery.
Earnings Estimates Rising
Over the last 90 days, the Zacks Consensus Estimate for fiscal 2013 has advanced 5.8% to $1.64, reflecting a year-over-year growth rate of 198.4%. The Zacks Consensus Estimate for fiscal 2014 has advanced 20.7% to $2.13 over the same time frame, reflecting a year-over-year growth rate of 56.6%.
Eagle Materials currently trades at a forward price-to-earnings (P/E) of 38.60x, a premium of 11.8% to the peer group average. On a price-to-sales and price-to-book basis as well, the stock is trading at premiums to industry averages. However, the stock has a trailing 12-month return on equity (ROE) of 11.1%, which is higher than the peer group average of 0.7%.
Shares of Eagle Materials have been rising consistently since the end of September 2011 and reached a 52-week high of $64.78 on January 7, 2013. The stock price has almost quadrupled since the September/October 2011 lows, when the housing market was fragile.
Moreover, the stock is currently trading above its 50- and 200-day moving averages, which stand at $42.23 and $54.71, respectively. In fact, the stock has been consistently trading above its 50-day moving average since early August 2012 and the 200-day moving average since the end of December 2011.
Volume is strong, averaging roughly 664K daily. The year-to-date return for the stock is 8.26%, compared with the S&P 500s return of 2.5%.
Based in Dallas, Texas, Eagle Materials is a manufacturer and distributor of building material and construction products like Cement, Gypsum Wallboard, Recycled Paperboard and Concrete and Aggregates. These products are used in construction and renovation of houses, roads, bridges, commercial and industrial buildings across the U.S. The company has a market cap of $3.05 billion.
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