Encore Wire Corporation

Encore Wire Corporation (WIRE - Snapshot Report) beat third quarter estimates by 25.93% even as it navigates the downturn in the construction industry and volatile copper prices. WIRE has a forward P/E of 14.4.

Company Description

Encore Wire manufactures a range of copper electrical wire for interior wiring in homes, apartments, manufactured housing and commercial and industrial buildings from its 120-acre corporate and manufacturing campus in McKinney, Texas.

Encore Beat Wall Street Third Quarter Estimates by 25.93%

Despite a challenging residential and commercial construction market, on Oct 22, Encore Wire reported third-quarter results that surprised on analysts' estimates by 7 cents a share.

Net income rose 40% to $8.1 million, or 34 cents per share, from $5.8 million, or 24 cents per share, in the third quarter of 2007. Analysts expected 27 cents.

Sales fell to $296.3 million from $308.5 million in the year ago period. For the first 9 months, sales were essentially flat compared to 2007 at $900.9 million compared to $902.8 million in 2007.

The company weathered a roller coaster copper market during the quarter. Third quarter volumes dropped 9% year-over-year.

"Copper prices were volatile during the third quarter of 2008, starting at a COMEX close price of $3.92 per pound on July 1 and finishing at $2.89 per pound on September 30," said Daniel L. Jones, President and CEO.

"Volatility of that magnitude and the uncertainty it generates tends to disrupt our customers normal buying patterns and has historically contributed to competitive pricing pressure. We believe we have sacrificed some unit volume in 2008 as we acted as an industry leader and exerted pricing discipline," he said.

Encore Wire Has Cash

The company is in an enviable financial position as it has cash and little debt. Long-term debt as of Sep 30 was $100 million due in 2011. WIRE's revolving line of credit was paid down to zero as of the end of the quarter.

Additionally, the company had $108.5 million in cash at the end of the third quarter. Encore Wire has declared 8 consecutive quarterly dividends.

Consensus Estimates Rise

Covering analysts are optimistic about Encore's fourth quarter and full year 2008 despite the difficult operating environment.

Fourth quarter estimates are up 9 cents to 26 cents per share in the last 60 days. 2008 full year estimates also jumped to $1.24 from $1.13 per share in the same time period.

Value Fundamentals

Encore Wire is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 2 out of the last 4 quarters.

WIRE is trading at 14.4x forward earnings. It has a price-to-book of 1.08. The company also has an outstanding 5-year return on equity (ROE) of 22.44%. Additionally, WIRE has a current dividend yield of 0.40%.

Read the full analyst report on WIRE