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Reasons Why it is Worth Investing in Tennant (TNC) Stock Now

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Tennant Company (TNC - Free Report) seems to be an attractive option for investors seeking exposure in the manufacturing industrial space. Healthy growth opportunities as well as solid fundamentals enhance the stock’s attractiveness.

The company is based in Eden Prairie, MN, and has a market capitalization of $1.5 billion. It presently sports a Zacks Rank #1 (Strong Buy). The company belongs to the Zacks Manufacturing - General Industrial industry, which comes under the ambit of the Zacks Industrial Products sector.

In the past three months, its shares were at a break-even level as compared with the industry’s growth of 4.5%. Notably, the S&P 500 has expanded 8.2%, while the sector gained 1.1% in the same timeframe.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Below we discussed why Tennant is a worthy investment option.

Earnings Performance and Projections: The company’s results were impressive for the first quarter of 2021. Its earnings surpassed estimates by 0.53% and sales beat the same by 5.49%. On a year-over-year basis, its earnings grew 105.3%, driven by growth in sales and margins.

In the quarters ahead, solid product and solution offerings, innovative capabilities, healthy balance sheet and sound demand might benefit Tennant. Also, healthy business through the e-commerce platform, distributors and direct sales to customers are likely tailwinds.

For 2021, Tennant anticipates adjusted earnings of $4.10-$4.50 per share, higher than the previously mentioned $3.50-$3.95. Also, net sales are anticipated to be $1.09-$1.11 billion as compared with $1.05-$1.08 billion stated earlier. Organic sales growth is expected to be 9-11%, higher than 5-8% stated previously.

Diversified Business Structure: Tennant has exposure in multiple end-markets, including healthcare, education, contract cleaning, manufacturing, retail, logistics and warehousing. Such diversification helps it offset weakness in one or multiple markets with strength in others.

Also, the company has exposure in more than 100 countries worldwide. The majority of its revenues are generated from the Americas; Europe, Middle East and Africa (“EMEA”); and the Asia Pacific (“APAC”). Notably, the adverse impacts of a 4% decline in revenues from the Americas were more than offset by a 12.4% increase in EMEA sales and 40.6% growth in APAC sales in the first quarter of 2021. Notably, the company’s total revenues increased 4.4% year over year in the first quarter.

Innovations: Over time, Tennant has used its innovative capabilities to expand its customer base, satisfy changing customer needs and enhance market presence. In February 2021, the company introduced a robotic floor scrubber meant for industrial purposes. In October 2020, it introduced a robotic floor scrubber for small spaces.

We believe that solid innovative capabilities place the company well to leverage benefits from favorable market trends like labor challenges in industrial and commercial markets, high health and safety standards, and high digital activities.

Shareholder Rewards: Tennant believes in rewarding shareholders through dividend payouts and share buybacks. In the first quarter of 2021, the company distributed dividends of $4.2 million to its shareholders, reflecting a slight increase from $4 million paid out in the year-ago quarter. Notably, it announced a hike of 5% in its quarterly dividend rate in October 2020. The dividend rate now stands at 23 cents.

In addition, the company repurchased 22,724 shares, at an average price of $78.04 per share, in the first quarter. Exiting the quarter, it was left with the authorization to buy back 1.4 million shares. A healthy cash flow position will likely help it reward its shareholders.

Earnings Estimate Revisions: The company’s earnings estimates have increased in the past 60 days. Currently, the Zacks Consensus Estimate for earnings is pegged at $1.02 for the second quarter of 2021, reflecting an increase of 34.2% from the 60-day-ago figure.

Tennant Company Price and Consensus

 

Tennant Company Price and Consensus

Tennant Company price-consensus-chart | Tennant Company Quote

Also, earnings estimates are pegged at $4.41 for 2021 and $4.97 for 2022, reflecting increases of 20.8% and 20.9% from the 60-day-ago figures, respectively.

Other Key Picks

Some other top-ranked stocks in the industry are Applied Industrial Technologies, Inc. (AIT - Free Report) , Barnes Group, Inc. (B - Free Report) and Chart Industries, Inc. (GTLS - Free Report) . While Applied Industrial presently sports a Zacks Rank #1, both Barnes and Chart carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for the stocks have improved for the current year. Further, earnings surprise for the last reported quarter was 35.64% for Applied Industrial, 22.58% for Barnes and 8.82% for Chart.

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