Back to top

Here's Why It's Worth Investing in DXP Enterprises (DXPE) Now

Read MoreHide Full Article

Investors seeking exposure in the machinery space can choose from stocks that don favorable Zacks Rank #1 (Strong Buy) or #2 (Buy). Of the many investment options, we believe that DXP Enterprises, Inc. (DXPE - Free Report) will be a smart choice. The stock currently carries a Zacks Rank #1 and it has a favorable VGM Score of A.

DXP Enterprises belong to the machinery sub-industry, which has companies that primarily work for general industries. This industry is positioned in the top 37% of more than 250 Zacks industries. Per our research, the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

We believe that machinery companies gain from favorable policy changes, expanding industrial production, healthy growth in infrastructural investments, rising demand for machinery made in the United States and the rising global economy. However, trade tiffs between nations, restricting business growth, are concerns.

Below we discussed why investing in DXP Enterprises will be a smart choice for investors.

Share Price and Earnings Performances, Robust Bottom-Line Outlook: Market sentiments seem to be working in favor of DXP Enterprises. The company’s share price has yielded 18% in the past month compared with 7.4% growth recorded by the industry.



We believe that much of the upside in DXP Enterprises’ share price has been induced by solid financial performance in the third quarter of 2018. Its earnings surpassed the Zacks Consensus Estimate by 17.95% and surged 187.5% from the year-ago tally. It’s worth mentioning here that the company surpassed estimates in three (including results of the third quarter) of the last four quarters while missing in one. Average earnings surprise was a positive 112.62%.

In the quarters ahead, DXP Enterprises anticipates gaining from healthy demand in industrial and oil markets, and advancing global market. Solid organic sales growth, synergistic gains from acquired assets and efforts to improve operational execution will support earnings growth.

DXP Enterprises does not provide earnings projections but upward revision in earnings estimates by brokerage firms is reflective of positive sentiments toward the company. In the past 30 days, earnings estimates for 2018 and 2019 have been raised by one brokerage firm. Currently, the Zacks Consensus Estimate for earnings per share stands at $1.70 for 2018 and $2.09 for 2019, reflecting growth of 13.3% and 9.4% from the respective 30-day-ago tallies. Further, these estimates represent year-over-year growth of 97.7% for 2018 and 22.7% for 2019.

DXP Enterprises, Inc. Price and Consensus
 

DXP Enterprises, Inc. Price and Consensus | DXP Enterprises, Inc. Quote

Revenues — Segmental Business Strong: DXP Enterprises’ revenues in the third quarter of 2018 expanded 22.3% year over year on the back of healthy results of its three segments — Service Centers, Innovative Pumping Solutions and Supply Chain Services.

DXP Enterprises stands to gain from its expertise in providing maintenance, repair, and operating and project solutions to its customers as well as from products and services offered to original equipment manufacturers. Moreover, solid product portfolio — including rotating equipment, metal cutting tools, bearing & power transmission, and others — and diversified end-market operations will be boons.

The Zacks Consensus Estimate for revenues for DXP Enterprises is pegged at $1.21 billion for 2018 and $1.30 billion for 2019, reflecting year-over-year growth of 19.9% and 8.1%, respectively.

Capital-Allocation Strategies: DXP Enterprises uses its capital for product development, capacity expansion, acquisitions and rewarding shareholders handsomely. In the first nine months of 2018, it paid dividends, totaling $68 million, to its shareholders.

In addition to this, the company acquired Application Specialties, Inc. in January this year. Application Specialties engages in providing machine shop supplies, cutting tools, coolants and abrasives. Since the acquisition, the acquired assets have been strengthening the company’s metalworking business.

Debt Profile: DXP Enterprises’ long-term debt at the end of the third quarter of 2018 was $237.4 million, down 0.5% from the balance at the end of 2017. Moreover, the company’s debt profile is better compared with the industry. Its debt/equity of 79.8% is lower than the industry’s 81.9%.

Other Stocks to Consider

Other top-ranked stocks in the industry are EnPro Industries, Inc. (NPO - Free Report) , Luxfer Holdings PLC (LXFR - Free Report) and Graco Inc. (GGG - Free Report) . While both EnPro Industries and Luxfer Holdings sport a Zacks Rank #1, Graco carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for all these three stocks have improved for the current year. Further, positive earnings surprise for the last quarter was 23.64% for EnPro Industries, 60.61% for Luxfer and 8.70% for Graco.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>




In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Luxfer Holdings PLC (LXFR) - free report >>

EnPro Industries (NPO) - free report >>

DXP Enterprises, Inc. (DXPE) - free report >>

Graco Inc. (GGG) - free report >>

More from Zacks Analyst Blog

You May Like

Published in