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Category: Stock Market and Worthington Industries
Date: 26 September 2019 Stock Price: $34.99 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Worthington Industries a global diversified metals manufacturing company.
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About Worthington Industries
Worthington Industries is a leading global diversified metals manufacturing company with 2019 fiscal year sales of $3.8 billion. Headquartered in Columbus, Ohio, Worthington is North America’s premier value-added steel processor providing customers with wide ranging capabilities, products and services for a variety of markets including automotive, construction and agriculture; a global leader in manufacturing pressure cylinders for propane, refrigerant and industrial gasses and cryogenic applications, water well tanks for commercial and residential uses, CNG and LNG storage, transportation and alternative fuel tanks, oil & gas equipment, and consumer products for camping, grilling, hand torch solutions and helium balloon kits; and a manufacturer of operator cabs for heavy mobile industrial equipment; laser welded blanks for light weighting applications; automotive racking solutions; and through joint ventures, complete ceiling grid solutions; automotive tooling and stampings; and steel framing for commercial construction. Worthington employs approximately 11,000 people and operates 75 facilities in 10 countries.
Founded in 1955, the Company operates under a long-standing corporate philosophy rooted in the golden rule. Earning money for its shareholders is the first corporate goal. This philosophy serves as the basis for an unwavering commitment to the customer, supplier, and shareholder, and as the Company’s foundation for one of the strongest employee-employer partnerships in American industry.
Founded in 1955, the Company operates under a long-standing corporate philosophy rooted in the golden rule. Earning money for its shareholders is the first corporate goal. This philosophy serves as the basis for an unwavering commitment to the customer, supplier, and shareholder, and as the Company’s foundation for one of the strongest employee-employer partnerships in American industry.
Overview of Worthington's 1st quarter 2019 earnings report
The numbers we are interested in (for the quarter):
- Sales: $855.859 million (down from $988.107 million from the same quarter of the previous year)
- Revenue decreased by -13.38% over the last 12 months
- Cost of sales: $738.568 million (down from $845.110 million for the same quarter of the previous year)
- Cost of sales decreased by -12.6% over the last 12 months
- Net loss: -$4.776 million (down from $54.942 million for the same quarter of the previous year)
- Diluted income per share: -$0.09 (down from $0.91 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 55.241 million (down from 60.621 million for the same quarter of the previous year)
- Cash and cash equivalents: $45.583 million
- Cash and cash equivalents per share: $0.825
- Cash and cash equivalents makes up 2.35% of Worthington's market capital
- Cash and cash equivalents makes up 1.92% of Worthington's total assets
- Accounts receivable: $472.441 million
- Accounts receivable makes up 19.82% of Worthington's total assets
- Inventories: $422.163 million
- Inventories makes up 17.7% of Worthington's total assets
- Stockholders equity of Worthington: $907.441 million
- Stockholders equity per share: $16.42
- Worthington is trading at 2.13 times its stockholders equity which is within the expected range of between 2 and 4 which most companies tend to trade at.
Worthington Industries' management commentary on the results and earnings guidance
COLUMBUS, Ohio, Sept. 25, 2019 (GLOBE NEWSWIRE) -- Worthington Industries, Inc. (NYSE: WOR) today reported net sales of $855.9 million and a net loss of $4.8 million, or $(0.09) per share, for its fiscal 2020 first quarter ended August 31, 2019. Results for the current quarter were negatively impacted by pre-tax impairment and restructuring charges of $45.3 million, of which $4.2 million was recorded in equity income. The after-tax impact of these items reduced earnings per share by $0.65. Results for the current quarter were also negatively impacted by a $4.0 million charge related to the early extinguishment of debt and estimated inventory holding losses in Steel Processing of $8.4 million, which reduced earnings per share by an additional $0.06 and $0.11, respectively.
The impact of these items was partially offset by a pre-tax benefit of $12.8 million, or $0.17 per share, related to the early termination of a customer take-or-pay contract in Pressure Cylinders, which accelerated the recognition of the related future earnings into the current quarter. In the first quarter of fiscal 2019, the Company reported net sales of $988.1 million and net earnings of $54.9 million, or $0.91 per share. Net earnings in the first quarter of fiscal 2019 were negatively impacted by pre-tax impairment and restructuring charges totaling $1.4 million, which reduced earnings per share by $0.01. Inventory holding gains in the prior year quarter were estimated to be $14.0 million, which increased earnings by $0.17 per share.
"Despite softness in several of our end markets and a lot of noise in the numbers, the overall health of the Company is good," said John McConnell, Chairman and CEO. “We delivered strong results in Pressure Cylinders, led by increasing demand in the oil and gas business and continued solid performance in consumer products. Steel Processing continues to deal with steel price declines and market softness in automotive and agricultural demand, but our Steel team is managing that business well with a focus on long-term growth.
Outlook
"We made significant progress in the quarter, continuing to address underperforming and non-core businesses, positioning us well for the remainder of the fiscal year," said John McConnell, Chairman and CEO. “While steel price declines remain a headwind for Steel Processing, overall, our businesses are executing well and taking advantage of market opportunities.”
The impact of these items was partially offset by a pre-tax benefit of $12.8 million, or $0.17 per share, related to the early termination of a customer take-or-pay contract in Pressure Cylinders, which accelerated the recognition of the related future earnings into the current quarter. In the first quarter of fiscal 2019, the Company reported net sales of $988.1 million and net earnings of $54.9 million, or $0.91 per share. Net earnings in the first quarter of fiscal 2019 were negatively impacted by pre-tax impairment and restructuring charges totaling $1.4 million, which reduced earnings per share by $0.01. Inventory holding gains in the prior year quarter were estimated to be $14.0 million, which increased earnings by $0.17 per share.
"Despite softness in several of our end markets and a lot of noise in the numbers, the overall health of the Company is good," said John McConnell, Chairman and CEO. “We delivered strong results in Pressure Cylinders, led by increasing demand in the oil and gas business and continued solid performance in consumer products. Steel Processing continues to deal with steel price declines and market softness in automotive and agricultural demand, but our Steel team is managing that business well with a focus on long-term growth.
Outlook
"We made significant progress in the quarter, continuing to address underperforming and non-core businesses, positioning us well for the remainder of the fiscal year," said John McConnell, Chairman and CEO. “While steel price declines remain a headwind for Steel Processing, overall, our businesses are executing well and taking advantage of market opportunities.”
Worthington Industries (NYSE: WOR) stock price history
The image below shows the stock price history of Worthington (NYSE: WOR) over the last 5 years. And it's been a very average time for Worthington (WOR). 5 years ago Worthington was trading around $36 a stock, and its currently it's trading at $34.99 While the losses are very minimal over the 5 year period, the opportunity cost of holding Worthington Industries instead of some of the other stock we recently valued that increased well over 100% over the last 5 years is significant. Worthington Industries is trading at a lot closer to its 52 week low than it is to its 52 week high which to us is a clear sign that the short term sentiment and momentum of the stock is largely negative.
Recent coverage of Worthington Industries (NYSE:WOR)
The extract below shows recent coverage of Worthington as obtained from Zacks
Worthington Industries (WOR - Free Report) came out with quarterly earnings of $0.56 per share, missing the Zacks Consensus Estimate of $0.72 per share. This compares to earnings of $0.92 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -22.22%. A quarter ago, it was expected that this metal manufacturer would post earnings of $0.77 per share when it actually produced earnings of $0.77, delivering no surprise.
Over the last four quarters, the company has surpassed consensus EPS estimates just once. Worthington, which belongs to the Zacks Metal Products - Procurement and Fabrication industry, posted revenues of $855.86 million for the quarter ended August 2019, missing the Zacks Consensus Estimate by 3.29%. This compares to year-ago revenues of $988.11 million. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Worthington shares have added about 5.9% since the beginning of the year versus the S&P 500's gain of 18.3%.
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Worthington Industries (WOR - Free Report) came out with quarterly earnings of $0.56 per share, missing the Zacks Consensus Estimate of $0.72 per share. This compares to earnings of $0.92 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -22.22%. A quarter ago, it was expected that this metal manufacturer would post earnings of $0.77 per share when it actually produced earnings of $0.77, delivering no surprise.
Over the last four quarters, the company has surpassed consensus EPS estimates just once. Worthington, which belongs to the Zacks Metal Products - Procurement and Fabrication industry, posted revenues of $855.86 million for the quarter ended August 2019, missing the Zacks Consensus Estimate by 3.29%. This compares to year-ago revenues of $988.11 million. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Worthington shares have added about 5.9% since the beginning of the year versus the S&P 500's gain of 18.3%.
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Worthington Industries' (NYSE: WOR) latest stock valuation
So based on the earnings report of Worthington (NYSE:WOR) what do we value Worthington (WOR) stock at? Based on their latest earnings report our target (full value) price for WOR at $38.40 a stock. We therefore believe the stock of Worthington is undervalued
But is it undervalued enough to lure investors to buy the stock? We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $38.40 Therefore we believe the a good entry point into the stock is below $34.60. We believe the stock of Worthington (WOR) will tick up slightly from its current price levels in coming weeks and months to closer to our target (full value) price.
But is it undervalued enough to lure investors to buy the stock? We usually suggest long term fundamental and value investors look to enter the stock at least 10% below our target price, which in this case is $38.40 Therefore we believe the a good entry point into the stock is below $34.60. We believe the stock of Worthington (WOR) will tick up slightly from its current price levels in coming weeks and months to closer to our target (full value) price.