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Industrial technology solutions provider EnPro Industries (NYSE:NPO) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 1.8% year on year to $271.9 million. It made a GAAP profit of $1.27 per share, improving from its loss of $0.89 per share in the same quarter last year.
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Enpro (NPO) Q2 CY2024 Highlights:
- Revenue: $271.9 million vs analyst estimates of $270.9 million (small beat)
- EPS: $1.27 vs analyst estimates of $1.07 (18.7% beat)
- EBITDA guidance for the full year is $265 million at the midpoint, in line with analyst expectations
- Gross Margin (GAAP): 43.8%, up from 41.5% in the same quarter last year
- Adjusted EBITDA Margin: 27.2%, up from 17.1% in the same quarter last year
- Free Cash Flow of $37.4 million is up from -$1.9 million in the previous quarter
- Market Capitalization: $3.06 billion
Holding a Guinness World Record for creating the world's largest gasket, Enpro (NYSE:NPO) designs, manufactures, and sells products used for machinery in various industries.
Engineered Components and SystemsEngineered components and systems companies possess technical know-how in sometimes narrow areas such as metal forming or intelligent robotics. Lately, automation and connected equipment collecting analyzable data have been trending, creating new demand. On the other hand, like the broader industrials sector, engineered components and systems companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
Sales GrowthReviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Enpro struggled to generate demand over the last five years as its sales dropped by 3.1% annually, a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Enpro's annualized revenue growth of 3% over the last two years is above its five-year trend, but we were still disappointed by the results.
This quarter, Enpro reported a rather uninspiring 1.8% year-on-year revenue decline to $271.9 million of revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 11% over the next 12 months, an acceleration from this quarter.
Operating MarginEnpro has managed its expenses well over the last five years. It demonstrated solid profitability for an industrials business, producing an average operating margin of 11.2%. This result isn't surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Enpro's annual operating margin rose by 5.1 percentage points over the last five years, showing its efficiency has meaningfully improved.
This quarter, Enpro generated an operating profit margin of 17.7%, up 2.8 percentage points year on year. This increase was encouraging, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Enpro's flat EPS over the last five years was weak but better than its 3.1% annualized revenue declines. This tells us management adapted its cost structure.
Diving into the nuances of Enpro's earnings can give us a better understanding of its performance. As we mentioned earlier, Enpro's operating margin expanded by 5.1 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Enpro, its two-year annual EPS declines of 52% show its recent history was to blame for its underperformance over the last five years. These results were bad no matter how you slice the data.
In Q2, Enpro reported EPS at $1.27, up from negative $0.89 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Enpro to grow its earnings. Analysts are projecting its EPS of $2.01 in the last year to climb by 192% to $5.86.
Key Takeaways from Enpro's Q2 Results We enjoyed seeing Enpro exceed analysts' EPS expectations this quarter. We were also glad its revenue outperformed Wall Street's estimates. Overall, we think this was a solid quarter. The stock remained flat at $146.02 immediately following the results.
