Worthington’s Q4 EPS double on YoY basis, tops estimates

Last week, diversified metals manufacturing company Worthington Industries, Inc. (WOR) rose to prominence when the company reported its fiscal 2016 fourth-quarter results that exceeded the Wall Street expectations. The share price of Worthington closed at $41.79 on Tuesday. For the reasons outlined below, we anticipate the share price to appreciate further very soon.

Net sales for the Q4 2016 declined to $714.67 million, from $846.02 million in the Q4 2015 period. However, the reported net sales were higher than the FactSet estimates of $692 million. The decline in the revenue was attributed to the lower average selling price for steel.

The net earnings for the fourth-quarter more than doubled to $58.52 million or $0.92 per share, from $28.86 million or $0.44 per share in the similar quarter of 2015. The Wall Street’s earnings estimates for the fourth-quarter were $0.64 per share.

Worthington Industries

The gross margin increased to 18.8% in the fourth-quarter, from 13% in the year-ago corresponding period. Similarly, the restructuring expenses decreased to $1.9 million, from $4.16 million a year-ago. Worthington Industries did not incur any impairment charges in Q4 2016.

The Ohio-based company made considerable gains from its joint ventures. Worthington generated $34.1 million as equity income, up $15.7 million y-o- y, from its joint ventures.

For the fourth-quarter, the company received cash distributions of $21.2 million. The valued added steel processor’s debt decreased sequentially by $27.6 million to $583.5 million. Similarly, the cash and cash equivalents of the globally renowned pressure cylinder manufacturer for industrial gas and cryogenic applications more than doubled to $84.19 million, from $31.07 million in the prior-year’s corresponding quarter.

Worthington Industries also declared a dividend of $0.20 per share, payable on September 29, 2016.

For the Fiscal 2016, the company reported net earnings of $157.63 million, up 80.6% from $87.26 in the fiscal 2015. John McConnell, Chairman and CEO, stated that the company is hopeful of doing well in the first-quarter of fiscal 2017. Thus, considering the financial health of the company, we can believe that the share price would consolidate and move higher in the days to come.

The stock has a firm support at 32. Resistance zone, as the chart indicates, exists between 40 and 42. The RSI indicator, with a reading of 59, reflects a bullish scenario.

Thus, a binary trader should enter into a one touch call option deal with a suitable broker. The target price for the trade should be about $45. The chances of making profit from the trade will increase, if the expiry date is in the last week of July.

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