Superior Essex is optimistic about the second quarter even as the North American market remains slow. The global wire and cable product manufacturer has surprised on estimates the last four quarters on average of 25.97%. Despite the stock trading near 52 week highs, the company has a 2008 P/E of only 10.78.
Full Analysis
Superior Essex, Inc. ( SPSX ) manufactures wire and cable products in 26 facilities in the United States, Mexico, France, Germany, the United Kingdom, Portugal and China.
The company, a Zacks #1 Rank (Strong Buy), is the world's largest producer of magnet wire, also known as winding wire, an insulated copper or aluminum conductor used by large equipment manufacturers and distributors. Magnet wire is found in industrial motors, transformers and generators, automotive applications, electrical coils and controls, and appliances. It is also used in motor and transformer repair. In North America, SPSX also manufactures outside plant copper communications wire and cable products, including fiber optic cables and premises copper cables for home and office use.
The company has been expanding in the last four years. In 2006, Superior expanded into China by constructing a magnet wire facility. In 2007, SPSX completed three magnet wire acquisitions.
Superior Essex Beats Wall Street Estimates by 32.69% in the First Quarter
On May 1, Superior Essex reported first quarter earnings that surprised on Wall Street estimates by 32.69%, or 17 cents. Earnings per share were up 50% to 69 cents compared to 46 cents in the year ago quarter. Analysts expected 52 cents per share.
The company said that Core Business revenues at constant copper increased 12% compared to first-quarter 2007. The results were attributed to benefits from the 2007 magnet wire acquisitions as well as positive currency exchange rates with the European operations.
SPSX is Bullish about the Second Quarter
Despite a sluggish North American market, the company believes it will continue to benefit from the 2007 magnet wire acquisitions on a year-over-year basis, but to a lesser degree than in the first quarter.
"All in all, for the second quarter of 2008 we expect to generate increases in both Core Business revenues on a constant copper basis and adjusted EPS, although at a rate below the 12% constant copper revenue growth and 50% adjusted EPS growth achieved in the first quarter of 2008," said Stephen M. Carter, chief executive officer of Superior Essex.
Consensus Estimates Rise for the Second Quarter and the Full Year
Brokerage analysts responded to the first quarter earnings report by raising estimates for the second quarter and the full year. For the second quarter, consensus estimates rose six cents to 98 cents compared to 92 cents. For the full year, consensus estimates jumped 30 cents to $3.48 compared to $3.18 per share. Estimates for 2008 are up 10.5% in the last 90 days.
Superior Essex's 2008 P/E is 10.78. Its price-to-book is 1.88, under the industry average of 2.20. The company has an excellent average five year return on equity (ROE) of 13.52%.
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$39.1 (05/14/08)
