Federal Signal Corp.
) saw an impressive 67.0% rise in profits in its second quarter,
and delivered an earnings surprise of 36.4%. With a robust order
backlog and a long-term earnings growth projection of 7.0%, this
provider of safety and security systems achieved a Zacks #1 Rank
(Strong Buy) on September 6 and offers an attractive opportunity
for growth-seeking investors.
On August 3, Federal Signal posted a profit of 15 cents per share
for the second quarter of 2012, beating the Zacks Consensus
Estimate of 11 cents and bettering last year's 9 cents. The
increase in profit was due to higher sales volume and a favorable
change in the product mix.
Revenues grew 16% to $204.4 million due to increased shipments,
partially offset by slack demand in European and U.S. municipal
police and fire markets.
Orders increased in all segments, except the Environmental
Solutions segment. Total order backlog surged 37.3% to $321.5
million from $234.2 million a year ago.
The company's sale of the Federal Signal Technologies Group
("FSTech") business to 3M Co. (
) will help it to focus on its core businesses of industrial and
municipal equipment and safety and security solutions. It will also
provide a valuable opportunity to repay $75 million of outstanding
debt immediately, improving the company's debt position.
Earnings Estimates Move Higher
Over the last 30 days, the Zacks Consensus Estimate for 2012 moved
up 15.6% to 37 cents, while the Zacks Consensus Estimate for 2013
advanced 27.9% to 55 cents. Estimates for 2012 and 2013 reflect
year-over-year growth of 184.6% and 48.7%, respectively.
Valuation is Reasonable
Federal Signal is currently trading at a forward P/E of 16.8x,
which is on par with the peer group average. The price-to-book of
2.3x is at a discount of 11.5% compared to the peer group average
A Look at the Chart
In the second quarter of 2012 the stock started outperforming the
moving averages and reached its 52-week high of $6.69 on September
Founded in 1901 and headquartered in Oak Brook, Illinois, Federal
Signal Corp. manufactures products and provides solutions that
serve municipal, governmental, industrial and institutional
customers. The $405.9 million company operates 19 manufacturing
facilities in six countries, serving customers in approximately 100
countries around the world.
Want More of Our Best Recommendations?
Zacks' Executive VP, Steve Reitmeister, knows when key trades are
about to be triggered and which of our experts has the hottest
hand. Then each week he hand-selects the most compelling trades and
serves them up to you in a new program called
FED SIGNAL CP (FSS): Free Stock Analysis Report
To read this article on Zacks.com click here.