Investors in Rockville, Maryland-based engineering firm Argan (AGX +3.28%) are having a good day Friday, as the energy plant builder closes out the week with a powerful earnings report for the fiscal fourth quarter of 2024, ended Jan. 31.
Analysts had forecast Argan would earn just $0.75 per share for the quarter, but Argan reported last night that Q4 earnings were a better-than-expected $0.89. Quarterly sales of $164.6 million also seem to have topped expectations. As of 10:15 a.m. ET, Argan stock is up 23.5%.
NYSE: AGX
Key Data Points
Argan Q4 earnings
As the company reported last night, quarterly sales surged 38.5% year over year -- albeit gross profit margin on those sales shrank, and net income for the quarter declined by 12%. Still, this was more profit than Wall Street had expected, and investors are reading this as good news.
It also helps that full-year earnings were up. Argan closed out the year with a $2.39-per-share net profit -- about 3% better than in fiscal 2023. Again, this was less of an improvement than you'd ordinarily like to see, given that sales grew 26%.
Is Argan stock a buy in 2024?
Management didn't give a lot of guidance on what to expect in the way of sales and earnings this year. CEO David Watson did say, however, that "backlog levels have remained relatively consistent since fiscal 2022 despite significant revenue growth in the same timeframe." This would imply that at the very least, Argan's rapid revenue growth last year won't immediately slow down this year. If backlog is steady, the worst investors should expect is flat revenue -- and if Argan can get its profit margins rising again, even that could translate into improved profits this year.
For what it's worth, analysts forecast 13% sales growth and a big 39% improvement in profits this year -- $3.32 on the bottom line. If Argan can hit those targets, its stock will be priced at 18.5 times this year's earnings. Not cheap, perhaps, but perhaps not too expensive to buy.
