This electrical equipment company beat analysts’ EPS estimates by $1.02 last quarter.
Atkore Inc. (ATKR)
From Cabot Top Ten Trader
Why the Strength
Atkore supplies metal framing and electrical conduits, known as raceways, to the North American market. It’s a niche business that Atkore management is focused on dominating, seeking to spend $1 billion in the next two to three years on acquisitions, stock repurchases and increased capital expenditures on things like beefing up its digital ordering systems. The company’s aggressive M&A effort means the addition of tuck-in business lines that provide huge year-over-year advances in an industry that is growing low to mid-single digits annually.
In its recently announced fiscal Q1 results, sales jumped 65%, EBITDA more than doubled and earnings hit $4.58 per share, up from $1.88 a year ago, mostly thanks to 2021 acquisitions. There are many forms of raceways, with various construction sub-sectors having different preferences—telecoms prefer HDPE plastic pipes to run their wires, homebuilders use PVC, transit systems want fiberglass. Atkore sells more than 30 plastic and metal conduit and framing products to meet those niches, and continues to buy competitors to broaden its offerings and reach. Recently, it acquired a deeper foothold into Canada with the purchase of Sasco, while adding fiber-optics conduit specialist Four Star, out of South Carolina.
Management has spent about $300 million of its $1 billion already, mostly on stock buybacks, but their preference is to keep buying up competitors, with more than 100 deals being evaluated right now. As business stands today, the company sees EBITDA coming in at $900 million for fiscal 2022, up $250 million from prior guidance. It’s not revolutionary, but Atkore has a good-looking roll-up story.
Technical Analysis
ATKR has been stair-stepping higher for many months, with plenty of corrections and shakeout along the way. The latest dip with the market started near Thanksgiving and lasted a couple of months, but only took the stock down 22% before shares catapulted higher during the past two weeks—ATKR gapped up on earnings and then raced back to its highs near 120 in the middle of last week before the market pulled it lower. If you’re game, we think the stock is a decent risk-reward around here.
Michael Cintolo, Cabot Top Ten Trader, cabotwealth.com, 978-745-5532, February 14, 2022