We retain our Neutral recommendation on
). Judging by the degree of uncertainty the company still faces
with regard to foreign currency fluctuation and clouded
macro-economic conditions, we think it wise not to be too
optimistic about its future performance even with its superior
technology, reliable global distribution and notable acquisition
The company's diversified business, long-term and steady working
histories with its clients and solid product lines helped it
establish itself in a formidable position within the industry.
Additionally, the company's remarkable financial returns provide a
high competitive edge in its operating industry which includes big
companies such as
Casella Waste Systems Inc.
TRC Companies Inc.
Donaldson Company, Inc.
Pall derives significant amount of revenue from the emerging
markets, including Latin America, MENA, China, India and Southeast
Asia. Of late, the company's Aerospace segment reported sales of
$163 million in the third quarter of fiscal 2012, surging 8.8% y/y,
mostly driven by the soaring demand in the Asian market.
As we look ahead, the company continues to see high growth
prospects in the developing economies for the quarters ahead.
Pall's game-changing technologies in areas like electronics and
biotechnology are constantly supporting its businesses and setting
the stage for further growth. Moreover, the global infrastructure
growth, increasing demand for water filtration systems and
improvement in the pharmaceutical markets are likely to augment the
company's revenues in the future.
However, the scenario is not really as bright as it appears as
certain issues still continue to be troublesome for the company.
The company's existing ERP transition issue caused unexpected delay
in the shipment of certain consumables, which in turn is adversely
affecting the company's cost structure.
During the expansion of Pall's systems business, it faced
considerably longer sales cycles with less predictable revenue and
no certainty of future revenue streams from related consumable
product offerings and services. Hence, any change in Pall's product
mix and pricing is expected to negatively affect its operating
The company's Aerospace segment is likely to be hurt by
escalating environmental regulation witnessed by the company's
clients, as well as customer requirements for enhanced equipment
reliability and fuel efficiency. Currently, as Pall's cost
structure is subject to the ERP transition issue; the company's
additional expenditure on updating its existing service offerings
may appear to be expensive.
Hence, until the situation ameliorates and a brighter picture
appears on the scene, we consider it wise to maintain a sideline
stance on Pall Corp. In the short run, we have a Zacks #4 Rank on
the stock which translates into a short-term Sell rating.
CASELLA WASTE (CWST): Free Stock Analysis
DONALDSON CO (DCI): Free Stock Analysis Report
PALL CORP (PLL): Free Stock Analysis Report
TRC COS (TRR): Free Stock Analysis Report
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