Thermon Misses on Q4 Earnings; Rises Y/Y - Analyst Blog

Thermon Group Holdings, Inc. THR reported mixed results for the fourth quarter of fiscal 2014 (ended Mar 31, 2014). While revenues dropped, earnings increased year over year. Adjusted earnings came in at 30 cents per share, up 66.7% year over year, primarily due to lower costs of goods sold and operating expenses. However, results missed the Zacks Consensus Estimate of 32 cents.

For fiscal 2014, Thermon generated adjusted earnings of $1.20 per share, up 31.9% year over year, while missing the Zacks Consensus Estimate of $1.22 by 2 cents. On a GAAP-basis, yearly earnings came in at 80 cents per share, down 5.9% year over year.

Revenues

Thermon generated revenues of $67.5 million in fiscal fourth-quarter 2014, down 5.9% year over year. Foreign currency transactions negatively impacted revenues by $1.4 million. Reported revenues also missed the Zacks Consensus Estimate of $72.0 million. 

Fiscal revenues were $277.3 million, well below the Zacks Consensus Estimate of $282.0 million and down 2.4% year over year. Exiting the fiscal year, backlog totaled $84.8 million compared with $95.2 million as on Mar 31, 2013.

Margins

Cost of sales in fiscal fourth-quarter 2014 decreased 12.7% year over year and represented 51.5% of total revenue, versus 55.5% in the year-ago quarter. Gross margin increased 400 basis points year over year to 48.5% backed by hike in maintenance, repair, operations/upgrade and expansion revenues.

Marketing, general and administrative and engineering expenses of Thermon, as a percentage of total revenue, stood at 22.3%. Adjusted earnings before interest, taxes, depreciation and amortization were $18.3 million, up from $15.7 million in the prior-year quarter.

Balance Sheet & Cash Flow

Exiting fiscal 2014, cash and cash equivalents were $72.6 million, up 7.9% sequentially. Long-term debt, net of current portion, decreased 3.1% to $108.0 million.

Thermon's net cash flow from operating activities declined 38.0% year over year to $9.6 million. Capital spending on purchase of property, plant and equipment was $929,000, down from $1.0 million in the comparable prior-year quarter.

In fiscal 2015, Thermon expects revenue growth in the mid-single digit range.

Other Stocks to Consider

Thermon currently has a market capitalization of $755.1 million and carries a Zacks Rank #4 (Sell). Some better-ranked stocks worth considering in the industry include Gorman-Rupp Co. GRC, Roper Industries Inc. ROP and Woodward, Inc. WWD. While Gorman-Rupp sports a Zacks Rank #1 (Strong Buy), both Roper Industries and Woodward hold a Zacks Rank #2 (Buy).

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