Coleman Cable - Value
Coleman Cable, Inc. ( CCIX ) is scaling new heights following strong first quarter results, which included a 29.4% earnings surprise. The stock has now moved to a Zacks #1 Rank (Strong Buy). Furthermore, this electrical wire and cable products company has a forward P/E of just 6.9, which makes it a true value stock.
Coleman Cable's growth story has been primarily driven by its acquisitions since last year. The company spent $69.7 million on acquisitions in 2011. Of these, the acquisition of Technology Research Corporation (TRC) was very significant in terms of broadening its electrical product platform and also creating new product lines in the areas of battery, power storage and power management systems.
Impressive First Quarter Results
On May 7, Coleman Cable reported first quarter 2012 earnings of 22 cents per share, outpacing the Zacks Consensus Estimate by a nickel. This was a good upside after posting a negative surprise of 75% in the fourth quarter of 2011. The better-than-expected results were driven by strong revenue growth, which surged 7.1% year over year to $220.5 million.
The company reported revenue growth across its segments. The TRC acquisition contributed 3.4% of the revenue growth. On May 31, Coleman Cable acquired assets of Watteredge, Inc. in order to expand its Engineered Product lines business.
On May 2, Coleman Cable's Board initiated a quarterly cash dividend of 2 cents per share. This initiation confirms the company's confidence in its business and its long term growth strategy.
Coleman Cable is expected to release its second quarter earnings on August 7. The company sees second quarter revenue between $220.0 million and $230.0 million, while adjusted earnings are expected to be in the range of 24 cents to 38 cents per share. While guidance for the year was not provided, the company expects the Watteredge acquisition to be accretive to its 2013 earnings in the range of 10 cents to 15 cents.
Zacks Consensus Estimates Rising
Analysts are quite bullish about 2012 and 2013. In the last 90 days, the Zacks Consensus Estimate for 2012 has risen 3.3% to $1.25. This reflects a year-over-year jump of 14.7 %.
For 2013, the Zacks Consensus Estimate has risen 7.8% to $1.52 over the same timeframe. This suggests an annual growth of approximately 22% from the current 2012 estimate of $1.25. The bullish sentiment reflects analysts' expectations that Coleman Cable will realize the full benefits of the recent acquisitions by the end of next year.
Coleman Cable Remains Undervalued
Shares have declined slightly over the last few months while the EPS is rising, therefore making it a good entry point for value investors. Apart from a low P/E ratio, Coleman's P/S ratio of 0.17 reflects a significant value opportunity (A P/E ratio under 15 and P/S ratio below 1 generally indicate value). The company also has an attractive PEG ratio of 0.7. Therefore, in addition to being a value stock, the company also offers a steady growth opportunity.
Waukegan, Illinois, based Coleman Cable, Inc. designs, develops, manufactures and supplies electrical wire and cable products for consumer, commercial and industrial applications. Under the Royal, Seoprene, Copperfield, Continental, Triangle, and Corra/Clad brands, the company provides industrial wire and cable products, including portable cords, machine tool wiring, building wires, welding, mining, pump, control, stage/lighting, diesel/locomotive, instrumentation, tray, thermocouple, high temperature, and metal clad cables. The company has a market capitalization of $152 million.
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