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Griffon (GFF) Divests System Engineering Group Business

Griffon Corporation GFF recently announced that it has completed the divestment of System Engineering Group, Inc. (“SEG”) to QuantiTech LLC. The financial terms of the transaction were kept under wraps.

Notably, the company’s shares declined 0.1% yesterday to eventually close the trading session at $20.36.

QuantiTech is engaged in offering highly technical engineering and management support services for mission critical programs to defense agencies.

Inside the Headlines

SEG is an operating division of Telephonics Corporation — a wholly owned subsidiary of Griffon. SEG is engaged in providing combat, radar and missile systems engineering and analytic support to several government program offices. Customers served by it include the likes of the Missile Defense Agency, U.S. Naval Surface Warfare Centers, and the U.S. Army Aviation and Missile Command. Notably, SEG operates under the company’s Defense Electronics business segment, which generated revenues of $341 million in fiscal 2020 (ended September 2020).

The divestment is in sync with Griffon’s strategy of restructuring its business portfolio and concentrating more on core businesses. Notably, the transaction will enable the company to better focus on and efficiently direct resources to its core defense electronics and systems product lines, thus offering value to its shareholders.

It’s worth mentioning here that the company also divested its specialty plastics business in 2018 to focus on core markets and improve its free cash flow conversion.

Zacks Rank and Price Performance

Griffon’s, with a $1.1-BILLION market capitalization, currently carries a Zacks Rank #5 (Strong Sell). Of late, Griffon has been experiencing coronavirus-induced challenges in various parts of its businesses. Also, the company’s high debt level remains concerning.

The company’s shares have declined 2.6% against 20.2% growth recorded by the industry in the past three months.

Stocks to Consider

Some better-ranked stocks are Danaher Corporation DHR, Raven Industries, Inc. RAVN and Applied Industrial Technologies, Inc. AIT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Danaher delivered a trailing four-quarter earnings surprise of 17.00%, on average.

Raven delivered a trailing four-quarter earnings surprise of 126.84%, on average.

Applied Industrial delivered a trailing four-quarter earnings surprise of 14.68%, on average.

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Griffon Corporation (GFF): Free Stock Analysis Report
 
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