ESCO Technologies (ESE) Earnings Preview: Q4 Report Expected Tuesday

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ESCO Technologies Inc. (NYSE:ESE) is scheduled to report Q4 earnings results on November 19, 2019, at 4 p.m. Central Time. The company is expected to report earnings of $1.06/share on revenue of $235.3 million. The consensus earnings per share (EPS) of $1.06/share is based on a poll of 2 analysts and represents a decline of -12.7% over the same quarter last year when the company reported earnings of $1.22/share.

The revenue forecast of $235.3 million based on a poll of 2 analysts implies a year-over-year (YoY) growth of 1.8%. Last year the company reported $231.1 million in revenue for the quarter.

Expected to report EPS decline of -$0.16/share for Q4, 2019
Metric Expected Prior Year YoY Change
Revenue $235.35 $231.09 1.8%
EPS $1.06 $1.22 -12.7%

Just yesterday, the company announced the divestiture of its Technical Packaging business segment, consisting of Thermoform Engineered Quality LLC (TEQ), Plastique Ltd., and Plastique sp. z o.o.

ESCO sold the business to subsidiaries of Sonoco Products Company (NYSE: SON), a manufacturer of industrial and consumer packaging products in North and South America, Europe, Australia, and Asia. Management decided to divest the Technical Packaging business segment to focus on the company’s core business units. The company’s strategy entails funding the growth of core business operations, in part, by monetizing non-core segments at robust valuations.

Earnings Call Trends

The company has a strong track record over the last 8 tracked quarters of exceeding earnings guidance. What are your expectations from ESCO Technologies for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q3, 2019 $0.77 $0.81 5.9% Beat
Q2, 2019 $0.62 $0.76 22.6% Beat
Q1, 2019 $0.45 $0.47 4.4% Beat
Q4, 2018 $1.16 $1.22 5.2% Beat
Q3, 2018 $0.71 $0.73 2.8% Beat
Q2, 2018 $0.40 $0.48 21.5% Beat
Q1, 2018 $0.32 $0.33 4.8% Beat
Q4, 2017 $0.75 $0.79 5.3% Beat

One question we always consider here at the Bankers’ Tribune is how influential are earnings reports to ESCO Technologies’s stock price performance? It’s more important for some companies than for others. In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2019, the stock price reacted by falling by -4.2%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-08 $80.01 $76.61 -4.2% Decline
2019-05-07 $76.69 $73.38 -4.3% Decline
2019-02-07 $65.75 $66.57 1.2% Increase
2018-11-15 $61.88 $68.56 10.8% Increase

Fundamentals And Technical Analysis

ESCO Technologies is currently trading at $86.75/share, up 2.7% for the day. The company is trading near its 52-week high. The company’s stock price is up 8.4% since the last earnings report and down -1.2% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 60.39 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 26.1x and a forward P/E multiple of 27.3x. ESCO Technologies’s current share price also implies a price-to-book (P/B) multiple of 2.7x. The following table summarizes some other key fundamental ratios:

Data as of November 19, 2019
Metric Value
Last Fiscal Period FY2019.Q3
Period End Date June 30, 2019
Stock Price (Current) $86.75
P/E Ratio 26.1x
P/E Ratio (Fwd) 27.3x
PEG Ratio 1.5
Total Debt to Capital (%) 9.0%
Levered Free Cash Flow $44.849 million
Enterprise Value / EBITDA 15.5x

Company Profile: ESCO Technologies Inc.

ESCO Technologies Inc. is a mid-cap stock with a market capitalization of $2.195 billion and a total enterprise value of $2.375 billion. The company operates in the Industrials sector and Machinery industry.

ESCO Technologies Inc. produces and supplies engineered products and systems for utility, industrial, aerospace, and commercial users worldwide. The company operates in four segments: Filtration/Fluid Flow (Filtration), RF Shielding and Test (Test), Utility Solutions Group (USG), and Technical Packaging.

The Filtration segment supplies filter elements, manifolds, assemblies, modules, indicators, custom and standard valves, filters, regulators, actuators, and other related components; elastomeric-based signature reduction solutions; and mission-critical bushings, pins, sleeves, and precision-tolerance machined parts, as well as processing services.

The Test segment designs and manufactures RF test and secure communication facilities, acoustic test enclosures, RF and magnetically shielded rooms, RF measurement systems, and broadcast and recording studios; and RF absorptive materials and filters, active compensation systems, antennas, antenna masts, turntables, electric and magnetic probes, RF test cells, proprietary measurement software, and other test accessories to perform various tests, as well as calibration for antennas and field probes, chamber certification, field surveys, customer training, and multiple product tests.

The USG segment offers diagnostic testing solutions for electrical equipment. Its solutions include protection diagnostics with the Doble Protection Suite, RTS, Manta MTS-5100, and F6000 series; the M4100 and transformational technology of the M7100 Doble Tester, the dobleARMS asset risk management system, and the Enoserv PowerBase and DUCe compliance tools.

The Technical Packaging segment offers thermoformed products and packaging materials for medical, pharmaceutical, retail, food, and electronic applications.

The company distributes its products through a network of distributors, sales representatives, direct sales teams, and in-house sales personnel. ESCO Technologies Inc. was founded in 1990 and is headquartered in St. Louis, Missouri.

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