Is Graham (GHM) Stock Outpacing Its Industrial Products Peers This Year?

Have you been paying attention to shares of Kornit Digital (KRNT)? Shares have been on the move with the stock up 30.6% over the past month. The stock hit a new 52-week high of $32.58 in the previous session. Kornit Digital has gained 67.2% since the start of the year compared to the 19.5% move for the Zacks Industrial Products sector and the 47.8% return for the Zacks Commercial Printing industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 6, 2024, Kornit Digital reported EPS of $0.11 versus consensus estimate of $0.08 while it beat the consensus revenue estimate by 3.12%.

For the current fiscal year, Kornit Digital is expected to post earnings of $0.23 per share on $203.5 million in revenues. This represents a 157.14% change in EPS on a -7.41% change in revenues. For the next fiscal year, the company is expected to earn $0.41 per share on $225.61 million in revenues. This represents a year-over-year change of 70.83% and 10.86%, respectively.

Valuation Metrics

Kornit Digital may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Kornit Digital has a Value Score of F. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 136.3X current fiscal year EPS estimates, which is a premium to the peer industry average of 18.3X. On a trailing cash flow basis, the stock currently trades at 5X versus its peer group's average of 5.7X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Kornit Digital currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Kornit Digital meets the list of requirements. Thus, it seems as though Kornit Digital shares could have potential in the weeks and months to come.

How Does KRNT Stack Up to the Competition?

Shares of KRNT have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Quad Graphics, Inc (QUAD). QUAD has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of B, and a Momentum Score of B.

Earnings were strong last quarter. Quad Graphics, Inc beat our consensus estimate by 30%, and for the current fiscal year, QUAD is expected to post earnings of $1.08 per share on revenue of $2.69 billion.

Shares of Quad Graphics, Inc have gained 35.7% over the past month, and currently trade at a forward P/E of 8.87X and a P/CF of 2.42X.

The Commercial Printing industry is in the top 10% of all the industries we have in our universe, so it looks like there are some nice tailwinds for KRNT and QUAD, even beyond their own solid fundamental situation.

Zacks Investment Research

As of Nov. 12, 2024, three stocks in the industrials sector could be flashing a real warning to investors who value momentum as a key criteria in their trading decisions.

The RSI is a momentum indicator, which compares a stock’s strength on days when prices go up to its strength on days when prices go down. When compared to a stock’s price action, it can give traders a better sense of how a stock may perform in the short term. An asset is typically considered overbought when the RSI is above 70, according to Benzinga Pro.

Here's the latest list of major overbought players in this sector.

Redwire Corp

• On Nov. 6, Redwire posted weaker-than-expected results for the third quarter. “Mergers and acquisitions are a core strength of Redwire and important to our growth strategy. During the third quarter, Redwire returned to our M&A roots by closing on the purchase of Hera Systems – our tenth acquisition. Hera Systems brings a highly competent team and two new platforms to Redwire’s spacecraft portfolio, expanding our ability to execute larger missions, particularly in our national security segment,” stated Peter Cannito, Chairman and Chief Executive Officer of Redwire. The company's stock gained around 34% over the past five days and has a 52-week high of $10.50.
• RSI Value: 81.89
• RDW Price Action: Shares of Redwire gained 15.1% to close at $10.38 on Monday.

American Superconductor Corporation

• On Oct. 30, American Superconductor posted better-than-expected quarterly earnings. “AMSC delivered fiscal second quarter net income of nearly $5 million and grew revenue by 60% when compared to the same period last year,” said Daniel P. McGahn, Chairman, President and CEO, AMSC. The company's stock gained around 35% over the past five days and has a 52-week high of $37.00.
• RSI Value: 80.60
• AMSC Price Action: Shares of American Superconductor gained 7.8% to close at $36.81 on Monday.

Graham Corp

• On Nov. 8, Graham reported better-than-expected second-quarter financial results and raised its FY25 gross margin guidance. “Our team’s efforts to diversify and strengthen the business over the past few years are clearly yielding results, as shown by our record second-quarter performance,” commented Daniel J. Thoren, President and Chief Executive Officer. “Strong sales growth in our markets, along with exceptional execution throughout the business, have driven meaningful margin expansion. Our strategic emphasis on higher-margin opportunities and operational efficiencies has been a key driver of this success.” The company's stock gained around 46% over the past five days and has a 52-week high of $41.19.
• RSI Value: 85.02
• GHM Price Action: Shares of Graham gained 5% to close at $41.02 on Monday.

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Graham (GHM) came out with quarterly earnings of $0.31 per share, beating the Zacks Consensus Estimate of $0.18 per share. This compares to earnings of $0.04 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 72.22%. A quarter ago, it was expected that this maker of vacuum and heat-transfer equipment would post earnings of $0.18 per share when it actually produced earnings of $0.33, delivering a surprise of 83.33%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Graham, which belongs to the Zacks Manufacturing - General Industrial industry, posted revenues of $53.56 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 6.07%. This compares to year-ago revenues of $45.08 million. The company has topped consensus revenue estimates two times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Graham shares have added about 76% since the beginning of the year versus the S&P 500's gain of 25.2%.

What's Next for Graham?

While Graham has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Graham: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.21 on $52 million in revenues for the coming quarter and $0.95 on $207.45 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Manufacturing - General Industrial is currently in the bottom 44% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

One other stock from the same industry, Broadwind Energy, Inc. (BWEN), is yet to report results for the quarter ended September 2024. The results are expected to be released on November 13.

This company is expected to post quarterly loss of $0.05 per share in its upcoming report, which represents a year-over-year change of -125%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Broadwind Energy, Inc.'s revenues are expected to be $36.85 million, down 35.5% from the year-ago quarter.

Zacks Investment Research

Manitex (MNTX) came out with quarterly earnings of $0.09 per share, beating the Zacks Consensus Estimate of $0.05 per share. This compares to earnings of $0.14 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 80%. A quarter ago, it was expected that this maker of forklifts, cranes and other lifting vehicles would post earnings of $0.08 per share when it actually produced earnings of $0.11, delivering a surprise of 37.50%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Manitex, which belongs to the Zacks Manufacturing - General Industrial industry, posted revenues of $66.54 million for the quarter ended September 2024, missing the Zacks Consensus Estimate by 4.90%. This compares to year-ago revenues of $71.33 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Manitex shares have lost about 34.8% since the beginning of the year versus the S&P 500's gain of 24.3%.

What's Next for Manitex?

While Manitex has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Manitex: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.08 on $75.47 million in revenues for the coming quarter and $0.33 on $295.02 million in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Manufacturing - General Industrial is currently in the bottom 44% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the same industry, Graham (GHM), has yet to report results for the quarter ended September 2024. The results are expected to be released on November 8.

This maker of vacuum and heat-transfer equipment is expected to post quarterly earnings of $0.18 per share in its upcoming report, which represents a year-over-year change of +350%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Graham's revenues are expected to be $50.5 million, up 12% from the year-ago quarter.

Zacks Investment Research