Dresser-Rand Group Inc.
), the U.S.-based compressor and turbine manufacturer, touched a
new life-time high of $71.91 during its trading session on Jul 17.
The company's share price rallied after Germany's Manager Magazin
) is interested in acquiring it.
The new apex price improved upon the last one of $67.38 hit on Jul
22, 2013. Dresser-Rand closed the session at $68.00, reflecting a
12.6% gain over the previous-day closing price. The trading volume
was 8.1 million shares.
Siemens, the Germany-based engineering firm, is possibly
contemplating a takeover bid or will likely indulge in a hostile
buyout, if situation so demands. The move will enable Siemens to
strengthen its natural gas drilling operations in the U.S.
For Dresser-Rand, the market has warmly welcomed the news and
believes that Siemen's takeover will work in the best interests of
the company's shareholders. If acquired, it will be integrated with
Siemens' Energy division that deals with power generation as well
as supply of turbines, compressors, and complete solutions for
industrial plants, particularly in the oil and gas industry.
After recording earnings growth of 7.9% in the past five years, we
believe Dresser-Rand is well poised for another 15.6% hike in
earnings in the next five years. The company's forward
price-to-earnings (P/E) multiple is estimated at 22.8x versus 16.6x
for the industry.
Expectation of higher earnings in the years ahead should fetch
Dresser-Rand better valuation, in case a deal materializes with
Siemens. Also, it should relieve the company of its highly
leveraged position, with a debt/equity ratio of 89.4% versus 41.5%
for the industry.
Dresser-Rand presently has a market capitalization of $5.2 billion
and carries a Zacks Rank #4 (Sell). Two better-ranked stocks in the
Cameron International Corp.
), each with a Zacks Rank #2 (Buy).
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