Powell Industries Inc. - Aggressive Growth

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Powell Industries Inc. ( POWL ) delivered strong second-quarter fiscal 2012 results on the back of better-than-expected performances from its large capital projects. This supplier of custom engineered solutions beat the Zacks Consensus Estimate by a whopping 186%, reversing a loss in the preceding quarter.

With new orders, strong backlog and a gradual increase in demand in its key markets, this Zacks #1 Rank (Strong Buy) is showing strength with earnings estimates moving higher.

A Strong Quarter

The second quarter earnings performance, announced on May 8, reversed the negative surprise trend of the preceding six quarters (except for a penny surprise in the fourth quarter of fiscal 2011). Earnings for the quarter were 63 cents, beating the year-ago earnings of 15 cents and the Zacks Consensus Estimate of 22 cents.

Revenue increased 45% to $181.5 million. Operating income advanced to $12.7 million, reflecting nearly a six-fold growth from the year-ago quarter.

Selling, general and administrative expenses, as a percentage of revenue, decreased by 535 basis points year over year.

New orders received during the quarter were $203 million, up $14 million sequentially.

Guidance Upbeat and Rising Estimates

Powell Industries expects fiscal 2012 earnings per share between $1.25 and $1.50, reflecting a year-over-year increase of 92%-130%. Revenue for the fiscal year is expected in the range of $675 million to $725 million, reflecting a year-over-year increase of 20%-29%.

All four estimates were raised in the last 30 days for fiscal 2012, while three out of four estimates moved higher for fiscal 2013.

The Zacks Consensus Estimates for fiscal 2012 and 2013 increased 37% and 6% to $1.41 and $2.19, respectively. The consensus estimate for 2012 is on the higher end of the company's guidance range.

Valuation

Shares of Powell are trading at roughly 26 times the fiscal 2012 estimates with the PEG ratio at 3.21 times, a premium of 221% to the benchmark of 1 for a value stock.

The price-to-sales ratio is at 0.67, compared with the peer group average of 1.25, indicating the company has more upside potential given its growing order book and strong backlog.

The chart below shows a positive price movement since the earnings release. Ever since May 8, the stock price grew 15.5%, riding on the enthusiasm generated from the strong performance as well as solid future projection.

About the company

Based in Houston, Texas, Powell Industries, Inc. is a provider of custom engineered solutions that manages as well as controls electrical energy and other critical processes for its global clients. Powell Industries, founded in 1947, operates in Europe, the Far East, the Middle East, Africa, North America, South America, and Central America. The company has a market cap of $437 million and 2,722 employees.

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



This article appears in: Investing , Stocks

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