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Estimates have been soaring for NN, Inc. (NNBR - Free Report) since the company posted a 43% positive earnings surprise on March 10.

NN took steps during the recession to slash costs and improve efficiency. Now that global demand for its products has improved significantly, the company is reaping the rewards.

Despite a huge run up in the share price since last summer, valuation is attractive with shares trading at just 11.5x forward earnings. It is a Zacks #1 Rank (Strong Buy) stock.

Company Description

NN, Inc. manufacturers and supplies high precision metal bearing components, industrial plastic and rubber products and precision metal components to a variety of markets around the globe.

The company is headquartered in Johnson City, Tennessee and has a market cap of $281 million.

Fourth Quarter Sales Up 23%

NN reported its results for the fourth quarter of 2010 on March 10. Earnings per share came in at 30 cents, crushing the Zacks Consensus Estimate of 21 cents. It is a significant improvement from a 12 cent loss reported in the same quarter of 2009.

Net sales were $96.3 million, which also beat the Zacks Consensus Estimate of $94.0 million. Sales were up 23% over the same quarter in 2009 thanks to strong global demand from the automotive and industrial end markets.

Gross profit as a percentage of sales expanded from 15.3% to 18.0% in the quarter as the company leveraged production efficiencies due to aggressive cost reduction initiatives. Meanwhile, selling, general and administrative expenses declined as a percentage of sales from 9.6% to 8.1%.

Bullish Outlook

CEO Roderick Baty stated on the Q4 press release that 2010 was a "remarkable turnaround" for the company. He went on to say that "the restructuring and permanent cost reduction actions we took in response to the global economic crisis have allowed us to emerge from the recession a more resilient and cost efficient company."

The company expects more strong growth in 2011 as well. The company expects "significant improvement" in revenues and net income over 2010 levels. This bullishness prompted analysts to significantly revise their estimates, as seen in the company's Price & Consensus Chart:

NNBR: NN, Inc.

The Zacks Consensus Estimate for 2011 is $1.45, which represents a remarkable 65% increase over 2010 EPS. The 2012 consensus estimate is $1.65, equating to 14% EPS growth.

NNBR is a Zacks #1 Rank (Strong Buy) stock.

Attractive Valuation

Shares have soared more than 275% since early July 2010. Valuation is still attractive, however, with shares trading at just 11.5x forward earnings, a discount to the industry average of 15.3x.

Its price to sales ratio of 0.76 is in-line with the peer group.

Todd Bunton is the Growth & Income Stock Strategist for

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