) has been gaining since announcing improved third quarter results,
leading to a new 52-week high on December 27. Shares of this
producer of specialty materials and components have soared roughly
28% year-to-date. Moreover, strong estimate revisions have helped
this stock achieve a Zacks #1 Rank (Strong Buy) status.
A long-term expected earnings growth rate of 13.5% on the back of
its restructuring initiatives and prudent cost management should
keep Rogers' price momentum intact.
Earnings Improve, Good Times Ahead
On November 5, Rogers Corporation reported third-quarter earnings
of 69 cents per share, beating the Zacks Consensus Estimate by 7.8%
though falling short year over year. Earnings per share have seen
an improving trend so far in 2012 with the third quarter witnessing
a 47% surge from the prior quarter and a whopping 165% increase
from the first quarter of 2012.
Revenues of $130 million came a bit under the Zacks Consensus
Estimate of $132 million.
Margins in the quarter were affected by declines in sales volumes
and costs associated with the planned shutdown of the Bremen
operation, as well as a decline in inventory levels. Gross margin
contracted 140 basis points to 33%. The company's initiatives to
streamline its operations had a positive impact of $2.5 million in
the quarter. Adjusted operating margin dipped 310 basis points to
The company has embarked on restructuring and streamlining
activities, which include efficiencies in supply chain and
manufacturing operations, cost reduction activities and headcount
reductions. These initiatives contributed around $4.5 million in
cost improvements during the quarter, ahead of the expected level
of $3.0 million. The company expects better operating profit
leverage on future sales growth given the lower cost structure now
in place. Going forward, these initiatives are expected to counter
weak market conditions.
A Better Quarter Ahead
For the fourth quarter, the company expects revenues between $129
million and $135 million. Compared to the year-ago quarter, the
guidance projects an annual sales growth of 2% to 7%. Earnings per
share are expected between 69 cents and 79 cents, which suggests a
year over year increase of 64% to 88%.
Earnings Estimates Skewed Higher
For 2012, all 4 estimates have been revised higher in the last 60
days, raising the Zacks Consensus Estimate by 7% to $2.18 per
share. For 2013, two of 4 estimates moved higher over the same
period, sending the Zacks Consensus Estimate for 2013 upward by 1%
to $2.84. This suggests year-over-year growth of 30.5%.
Valuation is Expensive but Justified
Rogers Corporation's valuation looks stretched compared to its
peers with respect to most of the metrics. The stock is currently
trading at a forward P/E of 22.29x, a 46% premium to the peer group
average of 15.28x. Its trailing twelve months P/E of 26.49x is at a
61% premium to the peer group average of 16.42. The price-to-book
of 1.91x is above the peer group average of 1.68x. The
price-to-sales of 1.59x is also above the peer group average. While
investors can get jittery looking at this valuation, the long-term
earnings potential should lend support.
Sound Technicals and Healthy Performance
Rogers Corporation is currently trading above its 50- and 200-day
moving averages, which stand at $43.17 and $40.42, respectively.
Interestingly, following a golden crossover in the early second
half of 2012, the 50-day moving average continues to read higher
than the 200-day moving average, manifesting a bullish trend.
On the performance front, Rogers Corporation has outperformed the
S&P 500 over the past year and has delivered a year-to-date
return of 33% versus 15% for the benchmark.
Founded in 1832, Connecticut-based Rogers Corporation manufactures
specialty materials and components that cater to the following
markets - portable communications, communications infrastructure,
consumer electronics, mass transit, automotive, defense, and clean
technology. With market capitalization of roughly $810.3 million,
Rogers Corporation operates facilities in the United States,
Belgium, China, Germany and South Korea, with joint ventures and
sales offices worldwide. It employs over 2,600 employees. Rogers
Corporation operates through the High Performance Foams unit, the
Printed Circuit Materials unit and Power Electronics Solutions
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