EnPro Downgraded to Strong Sell - Analyst Blog

On March 25, Zacks Investment Research downgraded EnPro Industries, Inc. NPO to a Zacks Rank #5 (Strong Sell) owing to disappointing results for the fourth quarter of 2013.

Why the Downgrade?

In the fourth quarter of 2013, EnPro's adjusted earnings per share of 46 cents dropped 22% year over year, while revenues declined to $275.5 million from $279.3 million in the year-ago quarter. The year-over-year decrease in revenues was due to a reduction in the parts and service demand along with lower engine revenues in the company's Engine Products and Services segment.

The company also recorded a year-over-year decline of 150 basis points in the gross margins to 31.1%. Adjusted earnings before interest, income taxes, depreciation and amortization for the reported quarter were $34.2 million versus $38.2 million in the year-ago quarter.

Exiting the fourth quarter of 2013, EnPro also recorded a sequential decline in cash and cash equivalents to $64.4 million. In 2013, cash generation from operations declined to $61.7 million from $118.2 million in 2012. Moreover, in the coming quarters, demand in the Engine Products and Services is expected to remain low.

Following the results, the Zacks Consensus Estimate for earnings per share decreased 9.6% to $2.44 for 2014, while the same for 2015 declined 3.3% to $2.95 over the past 60 days.

EnPro Industries is a leader in sealing products, metal polymer bearings, compressor systems and other engineered products for use in critical applications by industries worldwide.

Other Stocks to Consider

EnPro currently has a market capitalization of $1.5 billion. Some better-ranked stocks in the industry include Kadant Inc. KAI, The Middleby Corp. MIDD and Xylem Inc. XYL. While Kadant sports a Zacks Rank #1 (Strong Buy), Middleby and Xylem hold a Zacks Rank #2 (Buy).