DXP Enterprises (NASDAQ:DXPE) Issues Earnings Results, Misses Expectations By $0.15 EPS

DXP Enterprises (NASDAQ:DXPE) announced its quarterly earnings results on Thursday. The industrial products company reported $1.64 earnings per share for the quarter, missing analysts’ consensus estimates of $1.79 by ($0.15), Zacks reports. DXP Enterprises had a return on equity of 18.67% and a net margin of 4.45%. The business had revenue of $587.18 million for the quarter, compared to analysts’ expectations of $584.50 million.

Here are the key takeaways from DXP Enterprises’ conference call:

• DXP posted record Q3 sales of $587.2 million, up 14.3% year over year, including 8.7% organic growth. Adjusted EBITDA rose 19% to $67.3 million, and diluted EPS increased to $1.64 from $1.31.
• All three segments grew year over year, with Service Center organic sales up 11.3% and DXP Water sales up 71%. IPS sales climbed 43.3%, though acquisitions contributed most of its growth and organic IPS sales increased just 1.6%.
• Gross margin declined to 30.7% from 31.4%, primarily due to an unfavorable mix in Service Centers and IPS. Management described the pressure as mix-related rather than structural, while identifying margin improvement as an opportunity.
• Q3 free cash flow fell to $14.4 million from $28.1 million a year earlier as growth, acquisitions, and project activity required more working capital. Year-to-date free cash flow nevertheless increased to $70.5 million from $19.5 million, and DXP ended the quarter with $218.8 million in cash and no ABL borrowings.

DXP Enterprises Stock Up 5.9%

DXPE traded up $7.81 during trading hours on Friday, reaching $140.68. 312,433 shares of the stock traded hands, compared to its average volume of 185,375. DXP Enterprises has a fifty-two week low of $84.04 and a fifty-two week high of $208.00. The company has a market cap of $2.18 billion, a price-to-earnings ratio of 23.41 and a beta of 1.03. The company has a debt-to-equity ratio of 1.43, a current ratio of 2.96 and a quick ratio of 2.58. The firm’s fifty day simple moving average is $178.94 and its two-hundred day simple moving average is $161.97.

Analyst Upgrades and Downgrades

DXPE has been the topic of a number of recent research reports. Stephens boosted their price objective on DXP Enterprises from $160.00 to $220.00 and gave the stock an “overweight” rating in a research note on Friday, August 7th. Weiss Ratings downgraded DXP Enterprises from a “buy (b)” rating to a “buy (b-)” rating in a research report on Monday, October 26th. Finally, Wall Street Zen lowered DXP Enterprises from a “strong-buy” rating to a “buy” rating in a research note on Saturday, October 31st. Two analysts have rated the stock with a Buy rating and two have given a Hold rating to the company. Based on data from MarketBeat.com, the stock currently has an average rating of “Moderate Buy” and a consensus target price of $187.00.

Key Headlines Impacting DXP Enterprises

Here are the key news stories impacting DXP Enterprises this week:

• Positive Sentiment: Revenue was $587.2 million, modestly above analysts’ $584.5 million estimate, and coverage highlighted double-digit sales growth. Revenue results
• Neutral Sentiment: Some coverage raised the possibility that DXPE may be undervalued, but that view is tempered by earnings and fourth-quarter outlook concerns. Valuation and outlook article
• Negative Sentiment: Adjusted earnings were $1.64 per share, missing the $1.79 consensus estimate. Reports pointed to margin pressure, meaning sales growth did not translate into earnings as strongly as investors expected. Q3 margin analysis
• Negative Sentiment: The earnings miss has also raised questions about the fourth-quarter outlook, contributing to pressure on the shares after results. Stock reaction coverage

About DXP Enterprises

DXP Enterprises, Inc is an industrial distribution and services company headquartered in Houston, Texas. The company supplies maintenance, repair and operating products used by industrial, commercial and government customers, with an emphasis on rotating equipment, fluid handling and related industrial applications.

Its product offerings include pumps, valves, bearings, power-transmission components, hose and rubber products, industrial supplies, safety equipment and other maintenance products.