The Gorman-Rupp Company (GRC) in Mansfield, Ohio, designs, manufactures and sells a vast array of innovative pumps and pump systems for water, wastewater, construction, industrial, municipal, petroleum, original equipment, agriculture, and fire suppression applications worldwide. GRC shares have gained 15.5% in price over the past year but have declined 11.1% over the past month. The stock gained 1.6% intraday to close yesterday’s trading session at $37.19. The 12-month median price target of $46.00 indicates a 23.7% potential upside.
GRC’s $0.68 annual dividend yields 1.85% at its current share price. On January 28, GRC declared a $0.17 per share quarterly dividend on the company’s common stock, payable March 10, 2022, to shareholders of record as of Feb.15, 2022, which will mark the 288th consecutive quarterly dividend paid by GRC. Last October, the company increased its quarterly dividend by 9.7% to $0.17, marking its 49th consecutive year of increased dividends. This positions GRC in the top 50 of all U.S. public companies considering its number of years of increased dividend payments. The company’s dividend payouts have grown at a 7.7% CAGR over the past three years and 8.1% over the past five years.
Furthermore, GRC has authorized a share repurchase program of up to $50.0 million of the company’s common stock. “Gorman-Rupp is extremely proud to continue our long history of dividend payments and increased annual dividends. The dividend increase along with the share repurchase program are the continuation of our history of returning capital to shareholders and reflect the strength of our balance sheet and our ongoing confidence in the long-term outlook for Gorman-Rupp,” said Jeffrey S. Gorman, former Chairman and CEO. The role of Chief Executive Officer transitioned from Jeffrey S. Gorman to Scott A. King, who was previously the company’s President and Chief Operating Officer, effective January 1, 2022.
Here is what could shape GRC’s performance in the near term:
Sound Financials
GRC’s net sales increased 14.1% year-over-year to $94.16 million in the fourth quarter, ended December 31. Also, its gross profit came in at $22.35 million, versus $21.29 million for the same period in the prior year. Its incoming orders increased 33% from the prior-year quarter to $124.10 million, while its backlog stood at $186.0 million, up 64.4% year-over-year. And although the company’s EPS declined 3.8% year-over-year to $0.25 in the fourth quarter, it is up 17.5% year-over-year to $1.14 for the full year. Its fourth-quarter EPS included an unfavorable LIFO impact to the tune of $0.08 per share. Its net sales for 2021 came in at $378.32 million, indicating an 8.4% increase from the prior year. In addition, the company’s trailing-12-month levered FCF and net operating cash flow stood at $38.99 million and $61.27 million, respectively.
“We enter 2022 with a very healthy backlog and are well-positioned to continue to deliver top-line growth. We remain optimistic about the long-term outlook and believe our diverse markets, strong balance sheet, and highly-skilled workforce position us well to continue to deliver shareholder value.” Scott King, President, and Chief Executive Officer, said
Stable Growth Prospects
Analysts expect GRC’s revenues to increase 10% in the current quarter and 6% in the next quarter. Also, its revenue is expected to grow 7.2% year-over-year to $405.70 million in the current year. And the company’s EPS is expected to rise 21.4% in the current quarter and 9.4% in the next quarter. The Street expects GRC’s EPS to rise 9.2% year-over-year to $1.54 in the current year. And GRC’s EPS is expected to grow 15% per annum over the next five years.
Higher-Than-Industry Profit Margins
GRC’s 8.21% net income margin is 27.8% higher than the 6.43% industry average. Also, its 10.63% levered FCF margin is 107.9% higher than the 5.12% industry average.
Furthermore, GRC’s 7.14% and 7.17% respective ROA and ROTC are 38.4% and 7.1% higher than the industry averages.
POWR Ratings Show Promise
GRC has an overall B rating, which translates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Quality. Its higher-than-industry profit margins justify this grade.
GRC also has a B grade for Stability, which is consistent with its 0.56 beta.
Among 79 stocks in the Industrial - Machinery industry, GRC is ranked #11.
Beyond what I have stated above, one can view GRC’s grades for Value, Sentiment, Momentum, and Growth here.
View the top-rated stocks in the Industrial – Machinery industry here.
Bottom Line
The company has an impressive dividend growth history, and its stable cash flows should make its dividends payouts sustainable. Moreover, considering the company’s stable margins and growth prospects, I think GRC could be an ideal addition to one’s portfolio.
How Does the Gorman-Rupp Company (GRC) Stack Up Against its Peers?
GRC has an overall POWR Rating of B. However, one could also check out these other stocks within the Industrial – Machinery industry with A (Strong Buy) rating: Tennant Company (TNC), GEA Group Aktiengesellschaft (GEAGY), and Donaldson Company, Inc. (DCI).
GRC shares were unchanged in premarket trading Tuesday. Year-to-date, GRC has declined -16.13%, versus a -7.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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