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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 completed the acquisition of Post Falls, ID-based Ground Force Worldwide. The buyout has been valued at $45 million in cash.

The deal for the acquisition was announced by Federal Signal on Sep 8, 2021.

The company’s shares ended yesterday’s trading session at $40.38, reflecting a 2.38% increase from the previous trading day.

Inside the Headlines

The acquired business, Ground Force has expertise in manufacturing vehicles for handling specialty materials. Such vehicles are primarily used in the extraction of metals. Ground Force’s 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.

In the trailing 12 months, Ground Force has generated revenues of $34 million.

Federal Signal anticipates that the addition of Ground Force to its portfolio will be an added advantage for its 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.

Federal Signal anticipates the buyout of Ground Force to be earnings accretive in the first 12 months of the acquisition.

Other Buyout Activities of Federal Signal

Federal Signal often considers acquiring businesses to gain access to new markets, expand its product line and enhance the customer base. In the first half of 2021, the company invested $52.2 million on buyout activities (net of cash acquired).

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 a 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 gained 3.4% compared with the industry’s growth of 0.8%.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

The Zacks Consensus Estimate for Federal Signal’s earnings is pegged at $1.85 for 2021 and $2.14 for 2022, reflecting a decline of 1.1% and no change from the 60-day-ago figures. Also, earnings estimates of 46 cents for third-quarter 2021 reflect a decline of 2.1% from the 60-day-ago figure of 47 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. , Danaher Corporation (DHR - Free Report) and Griffon Corporation (GFF - Free Report) . While Raven currently sports a Zacks Rank #1 (Strong Buy), both Danaher and Griffon 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, 20.59% for Danaher and 4.88% for Griffon.


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