Today’s Stock of the Week has been hurt by a soft market in its industry as well as low energy prices, but if the plan to revitalize the nation’s infrastructure gets moving, so should this stock.
Federal Signal Corporation (FSS), sells street sweepers, sewer cleaners, excavation trucks and other heavy equipment—plus products and systems for emergency vehicles, first responders and industrial communications.
It endured a terrible market in recent years as the oil and gas industry downsized because of low energy prices. Federal Signal’s environmental-cleanup equipment languished as companies delayed capital purchases, and some older vehicles were converted from energy-industry uses to more general applications—competing with Federal Signal’s own new offerings. But Federal Signal remained a leader in waste, environmental, and fire-and-rescue equipment, and oil prices have risen and firmed since their 2015/16 lows. Many older vehicles now need repair—which should boost Federal Signal’s parts business.
The company has more than $1/share in free cash flow on a recent share price of $17.10 and a dividend of $0.28/share/yr., recently yielding 1.6%, that appears secure. Revenue of $708 million last year should grow to $778.5 million this year and $851.5 million in 2018.
Fiscal year: December. Earnings per share: 2018 est./$0.98…2017 est./$0.77…2016/$0.69.
This Weeks Expert
Tim Kang is senior vice president and senior research analyst at Olstein Capital Management, Purchase, New York, where he chooses stocks for the $697 million Olstein All Cap Value Fund (OFALX) and $157 million Olstein Strategic Opportunities Fund (OFSAX). OlsteinFunds.com