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EnPro (NPO) Shares Gain 20% in 3 Months: What's Driving It?

Shares of EnPro Industries, Inc. NPO have gained notably in the past three months. Initiatives to reshape the business portfolio, solid product offerings, cost-management actions and supply-chain initiatives seem to have boosted sentiments for the stock.

The Charlotte, NC-based company belongs to the Zacks Manufacturing - General Industrial industry — which comes under the ambit of the Zacks Industrial Products sector. The company currently has a $1.2-BILLION market capitalization and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past three months, the company’s shares have gained 19.6% compared with the industry’s growth of 10.4%. Notably, the S&P 500 has risen 7.4% and the sector has grown 11.4% during the same period.

Factors Influencing the Stock

In the past three months, EnPro has reported results for second-quarter 2020, with earnings surpassing estimates by 980%. Also, sales in the quarter beat estimates by 9.97%. Based on scenario planning, the company expects revenues to decline 15-25% year over year in 2020. It believes that an increase in lead time orders and seasonality leading to soft demand will impact its results in the third quarter.

Notwithstanding the above-mentioned headwinds, multiple factors might have supported the company’s price performance. Of the prevalent tailwinds, EnPro’s efforts to reshape its business portfolio, especially its heavy-duty truck business, and concentrate on better growth options deserve special mention.

In September 2020, the company agreed to acquire Alluxa — a provider of thin-film coatings and specialized optical filters. In the same month, the company sold Crewson brake adjuster and STEMCO Motor Wheel brake drum brands. In August, EnPro agreed to sell its Air Springs manufacturing business. In June, EnPro announced plans to exit GGB’s bushing block business.

In addition, EnPro’s expertise in material science, sound capital allocation strategy and focus on increasing aftermarket and recurring revenues is advantageous. Also, a solid customer base and product offerings, cost-management actions (savings of $30 million estimated for 2020), digital transformation and supply-chain initiatives might aid in the quarters ahead.

In addition to the aforementioned factors, reviving manufacturing activities in the United States is raising hopes of a better operating environment for industrial manufacturing companies. Notably, the ISM’s Purchasers Manufacturing Index scaled to 56% in August, reflecting four consecutive quarters of growth in manufacturing activities in the country.

Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $1.79 per share for 2020 and $2.21 for 2021, indicating an increase of 44.4% and 13.3% from the respective 60-day-ago figures. Such an upward revision in earnings estimates is reflective of improving growth opportunities for the company.

EnPro Industries Price and Consensus

EnPro Industries price-consensus-chart | EnPro Industries Quote

EnPro’s Performance Versus Other Industry Players

The company outperformed three companies in the industry — including IDEX Corporation IEX, Colfax Corporation CFX and Nordson Corporation NDSN — in the past three months. During the period, IDEX, Colfax and Nordson’s shares have gained 15.6%, 11.8% and 3.1%, respectively.

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Colfax Corporation (CFX): Free Stock Analysis Report
 
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IDEX Corporation (IEX): Free Stock Analysis Report
 
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