American Standard Companies
Interestingly, nearly half of the sales growth and almost a third of the earnings growth came from the company's smallest revenue source -- selling electronic braking and air suspension systems to truck manufacturers (Audi, a Volkswagen AG subsidiary, and General Motors
As for the quality of the earnings, that looks pretty solid, too. While both accounts receivable and inventories grew over the past year, neither of those numbers increased faster than sales -- a strong sign that American Standard owes none of its sales growth to channel stuffing or similar accounting chicanery.
The company's cash reserves are also looking mighty healthy, swelling by about $80 million (to $192 million), a 71% increase compared with last year. That good news, however, is offset by the only bad number evident on the balance sheet: Long-term debt increased to $1.7 billion from $1.6 billion.
Finally, in contrast to the year-ago period, American Standard was slightly free cash flow positive this quarter (plus $700,000 as opposed to minus $800,000). And the company is promising to further improve those numbers, boasting that by year end, it should have racked up about $500 million worth of free cash flow.
American Standard shareholders should hope that the company can deliver on this claim, and more importantly, on its promise to spend a considerable portion of this "discretionary income" on debt reduction. With all of Wall Street atremble at the prospect of increased interest rates, American Standard really needs to move debt reduction up a few notches on its list of priorities.
Tom Gardner loves to find underappreciated, undervalued companies in Motley Fool Hidden Gems . Interested in learning more? Take a free 30-day trial.
Fool contributor Rich Smith owns no shares in American Standard. The Motley Fool is investors writing for investors.
More from The Motley Fool
Wal-Mart Is Testing an AI-Powered Robot
The world's largest retailer is augmenting its human associates with an AI-infused robot to combat out-of-stock items.
ADT IPO: What Investors Need to Know
The security services company not only wants to guard your home and property, it wants to sell you some of its new stock, too.
Netflix Earnings: What to Watch
Can Netflix convince investors it can maintain strong momentum in 2018?