Franklin Electric Q3 Earnings: Can NasdaqGS:FELE Hit Its $0.63 EPS Target?

in EARNINGS/INVESTING IDEAS by

Franklin Electric Co., Inc. (NasdaqGS:FELE) is scheduled to report Q3 earnings results on October 27, 2020.

The company is expected to report earnings of $0.63/share on revenue of $326.6 million. The consensus earnings per share (EPS) of $0.63/share is based on a poll of 4 analysts and represents a decline in eps of −13.4% over the same quarter last year, when the company reported earnings of $0.73/share.

The revenue forecast of $326.6 million based on a poll of 4 analysts implies a year-over-year (YoY) decline in revenue of −6.3%. Last year the company reported $348.4 million in revenue for the quarter.

Expected to report EPS contraction of −13.4% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $326.59 $348.42 −6.3%
EPS $0.63 $0.73 −13.4%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 8 tracked quarters, missed 3 quarters, and met expectations 1 quarters.

What are your expectations from Franklin Electric Co., Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.45 $0.54 20.7% Beat
Q1, 2020 $0.19 $0.24 28.0% Beat
Q4, 2019 $0.51 $0.43 −16.1% Missed
Q3, 2019 $0.70 $0.73 4.3% Beat
Q2, 2019 $0.70 $0.70 0% Met
Q1, 2019 $0.40 $0.21 −47.0% Missed
Q4, 2018 $0.48 $0.52 7.8% Beat
Q3, 2018 $0.67 $0.64 −3.8% Missed

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, 2020, the stock price reacted by increasing 5.3%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 28, 2020 $54.13 $56.98 5.3% Increase
April 28, 2020 $50.84 $53.68 5.6% Increase
February 18, 2020 $60.89 $59.29 −2.6% Decline
October 29, 2019 $52.15 $55.13 5.7% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −3.03, the model suggests that the company is not likely to be an earnings manipulator. A value of −3.03 implies a 0.1% chance of earnings manipulation.

Fundamentals And Technical Analysis

Franklin Electric Co., Inc. is currently trading at $62.64/share, up 0.4% for the day. The company is trading at approximately 96.1% of its 52-week high of $65.16/share. The company’s stock price is up 9.9% since the last earnings report and down −0.6% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 54.69 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:FELE Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 32.74 and a forward P/E multiple of 33.40.

Franklin Electric Co., Inc.’s current share price also implies a price-to-book (P/B) multiple of 3.74. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $62.64
P/E Ratio 32.7x
P/E Ratio (Fwd) 33.4x
PEG Ratio −4.7
Total Debt / Total Capital 4.1%
Levered Free Cash Flow $199.7 million
EV / EBITDA 18.9x

Finbox

Franklin Electric Co., Inc. is a mid-cap stock with a market capitalization of $2.893 billion and a total enterprise value of $2.976 billion. The company operates in the Industrials sector and the Machinery industry.

Franklin Electric Co., Inc., together with its subsidiaries, designs, manufactures, and distributes water and fuel pumping systems worldwide. It operates in three segments: Water Systems, Fueling Systems, and Distribution. The Water Systems segment offers submersible motors, pumps, drives, electronic controls, monitoring devices, and related parts and equipment. Its motors and pumps are used principally for pumping clean water and wastewater in various residential, agricultural, and industrial applications; and manufactures electronic drives and controls that are used in motors for controlling functionality, as well as provides protection from various hazards, such as electrical surges, over-heating, and dry wells or tanks. The Fueling Systems segment provides pumps, pipes, sumps, fittings, vapor recovery components, electronic controls, monitoring devices, and related parts and equipment primarily for use in submersible fueling system applications. This segment serves other energy markets, such as power reliability systems, as well as includes intelligent electronic devices for online monitoring of the power utility, hydroelectric, and telecommunication and data center infrastructure. The Distribution segment sells to and provides presale support and specifications to the installing contractors. It sells products produced by the Water Systems segment and other brands. The company sells its products to wholesale and retail distributors, specialty distributors, original equipment manufacturers, industrial and petroleum equipment distributors, and oil and utility companies through its employee sales force and independent manufacturing representatives. Franklin Electric Co., Inc. was founded in 1944 and is headquartered in Fort Wayne, Indiana.

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