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Why Powell Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Powell Industries (NASDAQ: POWL  ) are up nearly 15% today after the company beat analyst expectations on the bottom line in its fiscal first quarter and offered mediocre forward guidance that nevertheless represented an improvement over its earlier result.

So what: Yesterday, Powell reported $153.9 million in revenue, a 2.3% year-over-year decline and substantially less than the $167.2 million sought by analysts. However, its earnings per share of $0.62 came in $0.03 ahead of the analyst consensus. The Street seems to be pleased with Powell's raised guidance for the full year, which in terms of revenue increased by $25 million on the low end to the $700 million to $725 million range, and which rose $0.25 per share on the low end in earnings terms to $2.50 to $2.75 per share. Analysts were looking for $723.8 million in revenue and $2.57 in EPS, so neither side of the guidance was far out of the ordinary.

Now what: Powell is now at multiyear highs, and its P/E ratio is ticking upwards again. GAAP EPS for the trailing 12 months is already $2.49, which seems to imply a relatively limited upside, as adjusted profit generally tends to come in ahead of GAAP reports. It might be worth watching this company, but today's big pop looks like a dramatic overreaction to rather underwhelming guidance.

Want more news and updates? Add Powell to your watchlist now.

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9/27/2016 11:41 AM
POWL $38.74 Up +0.45 +1.18%
Powell Industries CAPS Rating: No stars