Franklin Electric Co.

Franklin Electric Co., Inc. (FELE - Snapshot Report) has been able to effectively manage higher costs that have been eroding other companies profits, as seen by the expansion of its margins to 32.1% in its most recently reported quarter. Analyst estimates have continued to advance over the last 60 days and the company's share price has responded accordingly.

Franklin Electric Co., with its subsidiaries, designs and manufactures groundwater and fuel pumping systems. The company sells its products to industrial customers in America and international markets. Franklin was founded in 1944, has a market cap of $984 million and is headquartered in Bluffton, Indiana.

Second-Quarter Results

Franklin Electric stepped-up and delivered impressive second-quarter results on July 28, demonstrating the company's ability to deftly navigate a challenging economic environment.

Revenue came in at a record $201.7 million, up 32% from last year's $152.5 million. Net income totaled $15.3 million, more than double the $6.6 million from the same period last year. This produced earnings of 66 cents per share, ahead of analyst estimates of 56 cents per share.

Margins and Operating Income

The company reported that its gross profit improved to 32.1% of sales, a 3.7% improvement from last year, evidence that Franklin has been able to effectively manage higher commodity costs and preserve its margins. Operating income also jumped higher, to $26.4 million from $15.3 million last year.

Analyst Estimates

Analyst estimates have climbed higher as Franklin has continued to produce solid financial results. The current-year estimate has advanced to $2.33 per share, up from $2.29 per share 60 days ago. The current-year estimate is pegged at $2.88 per share, a 24% earnings growth projection.

Based upon the current-year estimate, this stocks has a forward P/E multiple of 18X, a premium to the overall market.

The Chart

Shares of FELE are up sharply from their July lows just above $35, recently trading around the $43 mark. The short-term high is just above $47. Moving forward, Franklin needs to deliver strong earnings to support more share appreciation because of the current valuations. Take a look at the chart.