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Federal Signal's (FSS) Ground Force Buyout to Boost Earnings

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Federal Signal Corporation (FSS - Free Report) yesterday announced that it signed an agreement to acquire Post Falls, ID-based Ground Force Worldwide. The transaction’s value has been fixed at $45 million in cash.

Yesterday, Federal Signal’s shares ended the trading session at $39.88, reflecting a 0.25% fall from the previous trading day.

Inside the Headlines

Ground Force engages in manufacturing vehicles for handling specialty materials, which are used in the extraction of metals. Its product offerings include water trucks, rock spreaders, dump bodies, and fuel and lube trucks. The need for services and parts fetches it recurring aftermarket businesses.

As noted, Ground Force’s addition to Federal Signal’s portfolio will be an added advantage for the latter’s material hauling product offerings. Green initiatives and the electrification of vehicles are likely to boost the demand for specialty vehicles, going forward. Ground Force’s talented workforce and aftermarket businesses are other tailwinds.

Ground Force’s revenues totaled $34 million in the trailing 12 months.    

Federal Signal anticipates completing the acquisition in fourth-quarter 2021. This is expected to be earnings accretive in the first 12 months of the acquisition completion.

Federal Signal’s Buyout Activities

Acquiring businesses are effective ways for Federal Signal to gain access to new markets, expand its product line and enhance the customer base. It invested $52.2 million on buyout activities (net of cash acquired) in the first half of 2021.

In February 2021, Federal Signal acquired Snohomish, WA-based OSW Equipment and Repair, LLC. The transaction included OSW Equipment’s wholly-owned subsidiaries, Washington-based Northend Truck Equipment and Canada-based Western Truck Body.

The transaction was valued at $52.5 million.

Zacks Rank, Price Performance and Estimate Trend

With a market capitalization of $2.4 billion, Federal Signal currently carries a Zacks Rank #3 (Hold). The company is poised to benefit from solid demand, organic growth actions, buyouts and shareholder-friendly policies. Raw material and supply-chain-related woes might be concerning.

In the past three months, the company’s stock has declined 5% against the industry’s growth of 6.6%.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

The Zacks Consensus Estimate for Federal Signal’s earnings is pegged at $1.87 for 2021 and $2.14 for 2022, reflecting respective growth of 2.2% and 2.4% from the 60-day-ago figures. Also, earnings estimates of 47 cents for third-quarter 2021 reflect an increase of 2.2% from the 60-day-ago figure of 46 cents.

Federal Signal Corporation Price and Consensus

 

Federal Signal Corporation Price and Consensus

Federal Signal Corporation price-consensus-chart | Federal Signal Corporation Quote

Stocks to Consider

Three better-ranked stocks in the industry are Raven Industries, Inc. (RAVN - Free Report) , Carlisle Companies Incorporated (CSL - Free Report) and Crane Co. (CR - Free Report) . While Raven currently sports a Zacks Rank #1 (Strong Buy), both Carlisle and Crane 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 companies improved for the current year. Further, the earnings surprise for the last reported quarter was 100% for Raven, 3.35% for Carlisle and 31.65% for Crane.

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