Myers Earnings Miss, Hikes Dividend - Analyst Blog


Myers Industries Inc .'s ( MYE ) fourth-quarter 2013 earnings of 26 cents a share missed the Zacks Consensus Estimate of 29 cents and remained flat year over year. Concurrent with earnings release, the company announced a 44% dividend hike coupled with a $40 million share repurchase program giving investors a reason to cheer after a not-so-impressive performance.

On a reported basis, including one-time items, the company reported earnings per share of 10 cents, down 60% from 25 cents earned in the year-ago quarter.

Net sales slipped 1.3% from the year-ago quarter to $211.3 million, and also came below the Zacks Consensus Estimate of $221.0 million. The downside resulted from a decline in sales at all of the company's business segments.

Adjusted gross profit rose 1.3% to $58 million compared with $57.3 million in the prior-year quarter. Gross margin expanded 70 basis points to 27.5%, driven by cost savings that came from productivity enhancements.

Full Year 2013

For the full year, Myers' earnings rose 6.4% to $1.00 per share. However, it fell short of the Zacks Consensus Estimate of $1.02. Full-year sales climbed 4.3% to $825.2 million, missing the Zacks Consensus Estimate of $835.0 million. Sales were mainly augmented by product innovations, benefits from the recent Novel and Jamco acquisition, remodeling of the company's Lawn and Garden segment and productivity gains.

Segmental Information

Material Handling segment posted a decline of 1.5% with net sales reaching $83.1 million, mainly due to an alteration in consumer and product mix and the absence of sales that came from a non-recurring project last year. Also, the adjusted net income prior to taxes plunged 24.2% during the quarter, owing to higher royalty leading to elevated selling, general and administrative (SG&A) expenses and other expenses related to employees and enhancement in technology.

Net sales at the Lawn and Garden segment inched down 0.1% from the year-ago quarter to $$58.7 million. However, adjusted net income before tax for the Lawn and Garden segment jumped 39.5% to $5.3 million during the quarter attributable to cost savings related to productivity gains and raw material substitution together with the benefits from the company's restructuring endeavors.

Distribution segment posted a sales decline of 1.8% to $43.9 million compared to the year-ago quarter. Segment results were mainly impacted by sluggish demand from customers abroad, which more than offset a rise in domestic new product sales. Adjusted net income before tax for the segment escalated 12.5% to $3.6 million mainly due to reduced SG&A on account fall in headcounts. .

Moreover, in Jan 2014, Myers declared the closure of this segment's Canadian branch, on account of negligible profits and non-satisfactory sales from this segment during 2013.

Engineered Products segment sales and adjusted net income before tax decreased by 2.5% to $29.3 million and by 25% to $1.8 million, respectively, during the fourth quarter.

Financial Updates

The company ended the year with $6.5 million in cash. Its long-term debt stood at $44.3 million and total shareholders' equity came in at $235.5 million at the end of fiscal 2013. During the year, the company generated operating cash flows of $96.1 million, a substantial improvement from $60.8 million last year.

Moreover, with constant emphasis on efficient inventory management and robust collections during the year, the company generated a free cash flow of $66.1 million, which was up 95%, year over year.

During the year, Myers spent $30 million as capital expenditure. Also, during the fourth quarter, the company announced changes to its loan agreement, which now allows a senior revolving credit facility worth $200 million, instead of $180 million authorized earlier.

Dividends and Share Repurchases

Myers declared a 44% hike in its quarterly dividend to 13 cents per share from 9 cents paid earlier. This dividend will be paid on Apr 1, 2014to stockholders of record as on Mar 10, 2014.

Along with the dividend hike announcement, the company authorized additional share buy backs worth $40 million for 2014, reflecting its capacity to generate healthy cash flows and its intentions to keep up with its efficient capital allocation.

Going Forward

Going forward, in 2014, the company expects to deliver another year of enhanced shareholder value and greater profits, driven by sale of new products, healthy cash flows, material substitutions, removal of low-margin operations and productivity gains from the second phase of the Lawn and Garden Segment restructuring initiatives facilitating improved margins. However, Myers expects the first quarter of 2014 to be hit by bad weather and transportation headwinds.

Further, the company expects capital expenditures for 2014 to total nearly $35-$40 million.

Other Stocks to Consider

This Ohio-based company currently holds a Zacks Rank #3 (Hold). Other better-ranked stocks in the industrial goods space that warrant a look include Packaging Corporation of America ( PKG ) and Ball Corporation ( BLL ), both holding a Zacks Rank #1 (Strong Buy)  and CTI Industries Corp. ( CTIB ) with a Zacks Rank #2 (Buy).

BALL CORP (BLL): Free Stock Analysis Report

CTI INDUSTRIES (CTIB): Free Stock Analysis Report

MYERS INDS (MYE): Free Stock Analysis Report

PACKAGING CORP (PKG): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BLL , CTIB , MYE , PKG

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