Tennant CompanyTNC has announced that it is soon going to acquire China-based Gaomei Cleaning Equipment Company. Financial terms of the transaction have been kept under wraps.
Gaomei Cleaning Equipment specializes in manufacturing and providing cleaning solutions for industrial and commercial purposes. Its product offerings include blowers, vacuum cleaners, high-pressure washers, single disc scrubbing machines, carpet extractors, floor scrubbers and sweepers. This privately held company was founded in 1997.
Details of Buyout
Per the agreement, Gaomei Cleaning Equipment will retain its independence and will continue to operate in markets served.
Gaomei Cleaning Equipment's efficient team, as well as technological expertise and solid product offerings, will solidify Tennant's business in Chinese markets. Further, Gaomei Cleaning Equipment's specialization in understanding needs of mid-tier markets will be an added advantage for Tennant.
Tennant anticipates the acquisition to complete in the fourth quarter of 2018.
Tennant's Buyout Strategies
The above-mentioned transaction is consistent with the company's policy of acquiring businesses to gain access to improve product lines and market exposure.
Earlier, in April 2017, Tennant acquired Italy-based IP Cleaning S.p.A. and its subsidiaries (IPC Group) from private equity fund, Ambienta. The buyout was valued at approximately $353 million.
IP Cleaning and its subsidiaries specialize in designing and manufacturing professional cleaning equipment, tools and other solutions.
Since acquired, IP Cleaning's product line has complemented Tennant's existing offerings and enhanced its geographical presence. It is worth mentioning that the IP Cleaning acquisition contributed 13.7% to the company's sales growth in the first half of 2018. On a geographical basis, this buyout increased sales generated from the Americas; Europe, Middle East and Africa; and the Asia Pacific by 2.5%, 45.1% and 14.2%, respectively.
Zacks Rank & Stocks to Consider
With a market capitalization of nearly $1.3 billion, Tennant currently carries a Zacks Rank #3 (Hold). In the quarters ahead, the company stands to benefit from solid product portfolio, expansion of geographical footprints, operational excellence and synergistic gains from acquired assets. However, tariffs, as well as supply-constraints related to labor and raw material, remain worrisome for Tennant.
For 2018, the company raised its earnings per share forecast to $1.95-$2.10 from the previously stated $1.85-$2.05. Revenues are predicted to be $1.10-$1.12 billion, reflecting year-over-year growth of 9.7-11.7%. The sales guidance is above the previous anticipation of $1.08-$1.11 billion.
In the past 60 days, the Zacks Consensus Estimate for earnings on the stock remained stable at $2.07 for 2018 and $2.69 for 2019.
Tennant Company Price and Consensus
Tennant Company Price and Consensus | Tennant Company Quote
Further, the company's share price has decreased 4% in the past three months, underperforming 12.5% growth recorded by the industry it belongs to.
Some better-ranked stocks in the industry are Colfax Corporation CFX , DXP Enterprises, Inc. DXPE and Barnes Group Inc. B . While both Colfax and DXP Enterprises sport a Zacks Rank #1 (Strong Buy), Barnes Group carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
In the past 60 days, earnings estimates for each of these stocks improved for the current year and next. The average positive earnings surprise for the last four quarters was 7.91% for Colfax, 101.32% for DXP enterprises and 6.88% for Barnes Group.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportColfax Corporation (CFX): Free Stock Analysis ReportTennant Company (TNC): Free Stock Analysis ReportDXP Enterprises, Inc. (DXPE): Free Stock Analysis ReportBarnes Group, Inc. (B): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research