Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Shares of Tennant Are Jumping Higher Today

By Lou Whiteman - Jul 31, 2019 at 3:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Second-quarter earnings topped internal and external expectations.

What happened

Shares of Tennant ( TNC 2.39% ) traded up more than 12% on Wednesday afternoon after the manufacturer of industrial-grade floor cleaning-equipment reported second-quarter earnings that easily exceeded expectations. The report continues a strong run for Tennant shares so far this year, with the stock now up more than 45% year to date.

So what

Before markets opened on Wednesday, Tennant reported non-GAAP earnings of $1.13 per share and GAAP earnings of $0.81 per share. This surpassed the $0.75-per-share consensus estimate despite revenue that, at $299.7 million, missed expectations by about $1.3 million. The non-GAAP results exclude charges related to the exit of two product lines.

A floor-cleaning machine in action.

Image source: Getty Images.

The company's revenue was up 2.6% year over year, and non-GAAP net income was up close to 37%. Sales were up 12.7% in the Asia-Pacific region and up 6% in the Americas, more than offsetting a 7.4% decline, including currency adjustments, in Europe.

CEO Chris Killingstad said in a statement that the results exceeded internal expectations, fueled by the company's efforts to grow profitability.

"Tennant Company's transition from a period of strategic expansion to a heightened focus on profitable growth is supported by three strategic pillars: winning where we have the strongest value proposition; reducing complexity and building scalable processes; and building on our position as an innovation leader," Killingstad said.

Adjusted gross margin was 41.4% in the quarter, a 130-basis-point improvement year over year, thanks to better pricing, favorable geographic and product mix, and operational efficiencies.

Now what

Going into 2019, Killingstad was worried that headwinds including tariffs, rising freight costs, and higher commodity prices would pressure results, but it's been so far so good for Tennant. The company is forecasting modest full-year sales growth of 3% to 4% and adjusted EPS of $2.65 to $2.85 per diluted share compared to $1.82 per share in 2018 and a loss of $0.35 per share in 2017.

It seems unlikely, given those headwinds, that the stock's second-half performance will match the year-to-date gains, but this is a well-run company that is managing its way through what should be a tough environment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tennant Company Stock Quote
Tennant Company
$80.21 (2.39%) $1.87

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.