Earnings Preview: Exide Technologies

May.30.12 | About: Exide Technologies (XIDEQ)

Company Profile

"Exide Technologies (XIDE), with operations in more than 80 countries, has the products and services to meet the world's stored energy needs in transportation and industrial markets. With more than 120 years in the battery business, Exide has the experience, advanced research and development capabilities, and knowledge to provide solutions to various stored energy requirements."

Exide Technologies will be holding their earnings conference call on June 8th, before the markets open at 9:00am.

Current Analyst Estimates

The consensus analyst estimate is for Exide Technologies to report earnings of $0.08/share, leaning towards the low end of the range at (-$0.06) versus the high end ($0.29). The mean estimate for revenue comes in at $750.48 million between estimates for revenues as low as $716.20 million and as high as $779.51 million. The estimated earnings number if attained would represent year over year earnings growth of 144.4% while the revenue growth, if coming in at consensus estimates would represent a decline of 3.1% from the same quarter a year ago. Earnings and revenue estimates are derived from the 6 analysts covering the stock.

Consensus Earnings Estimates Trend

Consensus estimates for earnings have declined slightly over the last three month period, shrinking from $0.11 to the current estimate of $0.08.

Current Analyst Price Targets

The only recent analyst actions taken place in the 2012 calendar year has been a Stifel Nicolaus resuming coverage on the company with a Hold rating. The company has not given a price target. All other price targets available are dated by at least 6 months and thus may be unreliable.

Ratio Analysis

To get a sense of the current valuation with respect to its

competitors, below is the ratio analysis for Exide Technologies versus EnerSys (NYSE:ENS) and Johnson Controls Inc. (NYSE:JCI) along with the industry and S&P 500 averages.

XIDE ENS JCI Industry S&P 500
Price / Earnings 4.29 12.15 12.92 15.8 15.3
PEG 0.32 0.93 0.71 --- ---
Price / Sales 0.06 0.67 0.50 0.1 1.3
Price / Book 0.43 1.56 1.83 0.4 2.2
Dividend Yield ---% ---% 2.30% 2.4% 2.1%
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Other companies in the Diversified Industrials Industry include industry titan General Electric (NYSE:GE), United Technologies Corp. (NYSE:UTX), 3M Corp. (NYSE:MMM) and Rockwell Automation (NYSE:ROK).

Fair Value Analysis

The valuation of discounted cash flows is an effective tool in identifying the intrinsic value for well established companies. The input for the analysis is as follows:

Input
Revenue Growth Rate (Current Year / Ongoing) 4% / 0%
Cost of Goods Sold (COGS)(% of Revenue) 81.5%
Operating Expenses (% of Revenue) 16.8%
Tax Rate 25%
Weighted Average Cost of Capital 7%
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Over the previous 4 years the company had been able to better manage its cost of goods sold and operating expenses, however that trend may be turning so the analysis will use the four year average for both items resulting in modest year over year increases. Analysts have the company growing revenues by 5% next year and then decreasing there after. TO preserve the conservative nature of the analysis, 4% revenue growth has been used for 2012 and diminishing off so that beginning in 2015 there would be no revenue growth. Since 2010 the company has shown losses resulting in the company receiving tax refunds, however a 25% tax rate has been used with the anticipation of the company swinging to a profit in 2012. Finally cash flows have been discounted by the weighted average cost of capital for the industry which currently stands around 7%. With these inputs the fair value analysis yields an approximate value for Exide Technologies of $3.41, which represents a 45.1% premium to the current market price.

Company profile quoted from Exide Technologies corporate website. Fundamental data derived from FinViz and TDAmeritrade.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.