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What: Shares of industrial distributor DXP Enterprises, Inc. (DXPE -2.70%) jumped as much as 51% today after reporting better-than-expected second-quarter earnings. At 1:00 p.m. EDT, shares were still up an incredible 46%.
So what: Sales increased 1% in the quarter, to $256.2 million, and net income fell 28%, to $5.1 million, or $0.34 per share. This crushed analysts' expectations of a $0.05 per-share loss in the quarter, and that's why shares are so much higher today. With industrial markets struggling at the moment, management is cutting costs where it can, and that's what led to the surprisingly strong quarter.
Now what: There's still a lot of uncertainty in demand, but the cost reductions resulted in an 81-basis-point increase in gross margin sequentially. And even though net income was down, it's the potential for upside if the market improves that excites investors. I'm cautiously optimistic about a longer-term recovery considering the breakeven results in the first half of the year, but the market thinks this is just the start of DXP's profits in 2016.
