EnPro Industries, Inc. (NPO) Bundle
Understanding EnPro Industries, Inc. (NPO) Revenue Streams
Understanding EnPro Industries, Inc. Revenue Streams
EnPro Industries, Inc. has diverse revenue streams, primarily categorized into two segments: Sealing Technologies and Advanced Surface Technologies. The company reported net sales of $790.3 million for the first nine months of 2024, marking a 2.5% decrease from $810.2 million in the same period of 2023 .
Breakdown of Primary Revenue Sources
- Sealing Technologies: Generated $524.2 million in the first nine months of 2024, up from $511.4 million in 2023, reflecting a 2.5% increase .
- Advanced Surface Technologies: Reported sales of $266.6 million for the same period, down from $299.1 million, indicating a 10.9% decrease .
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for the segments are as follows:
| Segment | 2024 Sales (in millions) | 2023 Sales (in millions) | Growth Rate (%) |
|---|---|---|---|
| Sealing Technologies | $524.2 | $511.4 | 2.5% |
| Advanced Surface Technologies | $266.6 | $299.1 | -10.9% |
| Total | $790.3 | $810.2 | -2.5% |
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to total revenue in the first nine months of 2024 is illustrated below:
| Segment | Revenue (in millions) | Percentage of Total Revenue (%) |
|---|---|---|
| Sealing Technologies | $524.2 | 66.4% |
| Advanced Surface Technologies | $266.6 | 33.6% |
Analysis of Significant Changes in Revenue Streams
In 2024, the revenue stream from Advanced Surface Technologies experienced a notable decline due to reduced demand in semiconductor capital equipment. This segment's sales decreased by 10.9% compared to the prior year, significantly impacting overall revenue . In contrast, Sealing Technologies showed resilience with a 2.5% increase, largely attributed to strategic pricing and strong performance in various markets, including aerospace and food and pharma .
The overall decline in revenue can be attributed to external market conditions affecting the Advanced Surface Technologies segment, which underscores the importance of monitoring industry trends and segment performance for future investment decisions.
A Deep Dive into EnPro Industries, Inc. (NPO) Profitability
A Deep Dive into EnPro Industries, Inc.'s Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, gross profit was $335.5 million on net sales of $790.3 million, resulting in a gross profit margin of 42.5%. In comparison, for the same period in 2023, gross profit was $330.5 million on net sales of $810.2 million, yielding a gross profit margin of 40.8%.
Operating Profit Margin: Operating income for the first nine months of 2024 was $110.1 million, leading to an operating profit margin of 13.9%. In contrast, for the first nine months of 2023, operating income was $56.3 million, with an operating profit margin of 6.9%.
Net Profit Margin: Net income attributable to the company for the first nine months of 2024 was $59.0 million, which corresponds to a net profit margin of 7.5%. This is a significant improvement from the $27.1 million net income, or 3.3% net profit margin, reported in the same period of 2023.
| Metric | 2024 | 2023 |
|---|---|---|
| Gross Profit | $335.5 million | $330.5 million |
| Net Sales | $790.3 million | $810.2 million |
| Gross Profit Margin | 42.5% | 40.8% |
| Operating Income | $110.1 million | $56.3 million |
| Operating Profit Margin | 13.9% | 6.9% |
| Net Income | $59.0 million | $27.1 million |
| Net Profit Margin | 7.5% | 3.3% |
Trends in Profitability: The profitability metrics indicate a strong upward trend in gross, operating, and net profit margins from 2023 to 2024. The gross profit margin increased by 1.7 percentage points, the operating profit margin improved by 7 percentage points, and the net profit margin rose by 4.2 percentage points.
Comparison with Industry Averages: The industry average gross profit margin is approximately 40%, which suggests that the company is performing above this benchmark. The operating profit margin average in the industry is around 10%, indicating that the company’s operating efficiency is also superior. Finally, the average net profit margin for similar firms is about 5%, positioning the company favorably in comparison.
Operational Efficiency: The company has demonstrated effective cost management strategies. The gross margin has improved due to a combination of strategic pricing and continuous improvement initiatives. Specifically, the adjusted segment EBITDA margin for Sealing Technologies rose to 33.1% in 2024 from 30.1% in 2023, reflecting enhanced operational efficiencies. Conversely, the Advanced Surface Technologies segment saw a decrease in its EBITDA margin to 20.9% from 24.3%, primarily due to increased costs in labor and manufacturing overhead.
| Segment | 2024 Adjusted Segment EBITDA | 2023 Adjusted Segment EBITDA | 2024 EBITDA Margin | 2023 EBITDA Margin |
|---|---|---|---|---|
| Sealing Technologies | $173.5 million | $153.9 million | 33.1% | 30.1% |
| Advanced Surface Technologies | $55.6 million | $72.8 million | 20.9% | 24.3% |
The analysis of profitability metrics indicates robust financial health, characterized by improving margins and effective cost management strategies. The company continues to outperform industry averages, reflecting its operational effectiveness and strategic positioning.
Debt vs. Equity: How EnPro Industries, Inc. (NPO) Finances Its Growth
Debt vs. Equity: How EnPro Industries, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, EnPro Industries reported total liabilities of $1,077.2 million, which includes current liabilities of $133.4 million and non-current liabilities of $943.8 million. The company has a total debt of $600 million, comprising both long-term and short-term obligations.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 0.79, calculated by dividing total debt ($600 million) by total shareholders' equity of $761.1 million. This ratio is below the industry average of 1.0, reflecting a conservative approach to leveraging.
Recent Debt Issuances
In January 2024, EnPro acquired Advanced Micro Instruments, Inc. for $209.4 million, funded primarily through existing credit facilities. The company has also engaged in refinancing activities, notably prepaying $133.1 million of its Term Loan A-1 Facility in July 2023.
Credit Ratings
The company holds a credit rating of B1 from Moody's and B+ from Standard & Poor's, indicating a stable outlook with moderate credit risk.
Balancing Debt Financing and Equity Funding
EnPro Industries maintains a balanced approach to financing, utilizing both debt and equity. In the first nine months of 2024, the company paid $19.0 million in dividends, reflecting a commitment to returning value to shareholders while managing its debt obligations.
| Financial Metric | Amount (in millions) |
|---|---|
| Total Liabilities | $1,077.2 |
| Current Liabilities | $133.4 |
| Non-Current Liabilities | $943.8 |
| Total Debt | $600.0 |
| Shareholders' Equity | $761.1 |
| Debt-to-Equity Ratio | 0.79 |
| Recent Acquisition (AMI) | $209.4 |
| Dividends Paid (2024) | $19.0 |
Assessing EnPro Industries, Inc. (NPO) Liquidity
Assessing EnPro Industries, Inc. Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets (in millions) | Current Liabilities (in millions) | Current Ratio |
|---|---|---|
| $248.7 | $133.4 | 1.86 |
Quick Ratio: The quick ratio, which excludes inventories, is calculated as follows:
| Current Assets (excluding inventories) (in millions) | Current Liabilities (in millions) | Quick Ratio |
|---|---|---|
| $248.7 - $143.3 = $105.4 | $133.4 | 0.79 |
Working Capital Trends: Working capital as of September 30, 2024, reflects a positive trend:
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $248.7 | $133.4 | $115.3 |
| December 31, 2023 | $407.8 | $144.3 | $263.5 |
Cash Flow Statement Overview:
| Cash Flow Activities | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $103.5 | $154.8 |
| Investing Activities | $(229.5) | $4.7 |
| Financing Activities | $(44.0) | $(162.8) |
Potential Liquidity Concerns: Despite a robust current ratio, the quick ratio indicates a potential liquidity concern, as it falls below 1. This suggests that the company may have difficulty covering short-term liabilities without selling inventory. Additionally, cash flow from operations decreased in 2024 compared to 2023, indicating potential challenges in sustaining operational liquidity.
Cash Reserves: As of September 30, 2024, the company held:
| Cash and Cash Equivalents (in millions) | Location |
|---|---|
| $27.6 | United States |
| $179.3 | Outside of the United States |
Overall, the liquidity and solvency position of the company indicates a strong capacity to meet short-term obligations, although the quick ratio suggests a need for closer monitoring of liquid assets relative to current liabilities.
Is EnPro Industries, Inc. (NPO) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio for the company is calculated as follows:
- Current Stock Price: $156.20
- Trailing Earnings per Share (EPS): $2.80
- P/E Ratio: 55.71 (calculated as Stock Price / EPS)
Price-to-Book (P/B) Ratio
The P/B ratio is calculated using the following data:
- Book Value per Share: $73.60
- P/B Ratio: 2.12 (calculated as Stock Price / Book Value per Share)
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides insights into the valuation relative to earnings before interest, taxes, depreciation, and amortization:
- Enterprise Value (EV): $2.05 billion
- EBITDA: $196.6 million
- EV/EBITDA Ratio: 10.43 (calculated as EV / EBITDA)
Stock Price Trends
Over the last 12 months, the stock price has exhibited the following trends:
- 12-Month High: $167.00
- 12-Month Low: $110.50
- Current Price: $156.20
- Price Change Over 12 Months: +30.00%
Dividend Yield and Payout Ratios
The company has maintained a steady dividend policy as shown below:
- Annual Dividend per Share: $1.20
- Dividend Yield: 0.77% (calculated as Annual Dividend / Current Stock Price)
- Payout Ratio: 42.86% (calculated as Annual Dividend / EPS)
Analyst Consensus on Stock Valuation
Current analyst ratings suggest the following:
- Buy Ratings: 3
- Hold Ratings: 5
- Sell Ratings: 1
- Average Target Price: $160.00
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 55.71 |
| P/B Ratio | 2.12 |
| EV/EBITDA Ratio | 10.43 |
| 12-Month High | $167.00 |
| 12-Month Low | $110.50 |
| Current Price | $156.20 |
| Annual Dividend per Share | $1.20 |
| Dividend Yield | 0.77% |
| Payout Ratio | 42.86% |
| Analyst Buy Ratings | 3 |
| Analyst Hold Ratings | 5 |
| Analyst Sell Ratings | 1 |
| Average Target Price | $160.00 |
Key Risks Facing EnPro Industries, Inc. (NPO)
Key Risks Facing EnPro Industries, Inc. (NPO)
The financial health of EnPro Industries, Inc. is influenced by various internal and external risk factors. These risks can significantly impact the company's performance and stock valuation.
Industry Competition
EnPro operates in a highly competitive environment, particularly within its segments of sealing technologies and advanced surface technologies. The company faces competition from both established players and new entrants, which can lead to pricing pressures and reduced market share. For example, in the first nine months of 2024, the company reported a 2.5% decrease in sales compared to the same period in 2023, attributed in part to competition in the market.
Regulatory Changes
Changes in regulations, especially those related to environmental standards, can impose additional costs on operations. The company has reported increased environmental-related costs of $1.8 million in the first nine months of 2024 compared to the previous year. Compliance with these regulations may require significant capital investments and operational adjustments.
Market Conditions
The company's financial performance is sensitive to changes in market conditions, including fluctuations in demand for its products. For instance, the Advanced Surface Technologies segment experienced a 10.9% decline in sales due to weakened demand in the semiconductor capital equipment market. Such volatility can adversely affect revenue projections and profitability.
Operational Risks
Operational risks include disruptions in production, supply chain issues, and challenges in integrating acquired businesses. In 2024, the company’s operational activities generated $103.5 million in cash, down from $154.8 million in 2023, reflecting operational challenges. Moreover, the acquisition of AMI for $209.4 million has increased the complexity of operations and integration costs.
Financial Risks
Financial risks encompass interest rate fluctuations, changes in credit availability, and foreign exchange risks. The company's interest expense increased by $3.1 million in the first nine months of 2024, primarily due to lower interest income on cash balances. Additionally, the effective tax rate for the nine months ended September 30, 2024, was 21.0%, a significant decrease from 59.8% in the prior year, signaling potential tax-related vulnerabilities.
Strategic Risks
Strategic risks involve the company’s ability to effectively implement its business strategies. The company has actively pursued acquisition opportunities, but failures in execution can lead to financial losses. For instance, the company repatriated $42.6 million during the first nine months of 2024 to reduce U.S.-based indebtedness, indicating potential liquidity management challenges.
Mitigation Strategies
EnPro has several strategies in place to mitigate these risks. The company maintains a diversified product portfolio to reduce dependency on any single market segment. As of September 30, 2024, EnPro held $27.6 million in cash and cash equivalents in the United States, alongside $179.3 million held internationally. This liquidity allows the company to respond to operational challenges and pursue growth opportunities effectively.
| Risk Factor | Description | Recent Impact |
|---|---|---|
| Industry Competition | High competition leading to pricing pressures | Sales decreased by 2.5% YoY |
| Regulatory Changes | Increased compliance costs | Environmental costs increased by $1.8 million |
| Market Conditions | Fluctuations in demand affecting sales | Advanced Surface Technologies sales down 10.9% |
| Operational Risks | Production disruptions and integration challenges | Cash from operations decreased to $103.5 million |
| Financial Risks | Interest rate fluctuations and credit availability | Interest expense increased by $3.1 million |
| Strategic Risks | Challenges in executing business strategies | Repatriated $42.6 million to manage debt |
Future Growth Prospects for EnPro Industries, Inc. (NPO)
Future Growth Prospects for EnPro Industries, Inc.
Analysis of Key Growth Drivers
EnPro Industries is poised for growth through various strategic initiatives, including product innovations, market expansions, and acquisitions. The company recently acquired Advanced Micro Instruments, Inc. (AMI) for $209.4 million, enhancing its capabilities in application-specific analyzers and sensing technologies.
Future Revenue Growth Projections and Earnings Estimates
Pro forma net sales for the third quarter of 2024 were $260.9 million, reflecting an increase of 4.1% compared to the same period in 2023. For the nine months ending September 30, 2024, net sales were $790.3 million, a decrease of 2.5% from $810.2 million in the prior year. The earnings per share (EPS) from continuing operations for the nine months was $2.80, a significant rise from $0.75 in the same period of 2023.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Sales | $260.9 million | $250.7 million | $790.3 million | $810.2 million |
| Income from Continuing Operations | $19.8 million | $8.3 million | $59.0 million | $15.7 million |
| Diluted EPS | $0.94 | $0.39 | $2.80 | $0.75 |
Strategic Initiatives or Partnerships That May Drive Future Growth
The acquisition of AMI is expected to create synergies that will enhance EnPro's market position in multiple sectors, including natural gas and biogas. The company's focus on enhancing infrastructure integrity and facilitating the clean energy transition aligns with growing market demands.
Competitive Advantages That Position the Company for Growth
EnPro Industries benefits from a robust backlog of $241.6 million as of September 30, 2024, with approximately 95% expected to be satisfied within one year. The company has established strong relationships with key customers in various sectors, including food processing, industrial processing, and aerospace, enhancing its competitive edge.
The effective tax rate for the nine months ended September 30, 2024, was 21.0%, significantly improved from 59.8% in the previous year, allowing for better net income retention. Furthermore, EnPro's strategic pricing actions and continuous improvement initiatives have contributed to increased adjusted Segment EBITDA margins.
Conclusion
EnPro Industries is strategically positioned for future growth through acquisitions, product innovations, and expanding market opportunities, supported by a solid financial foundation and competitive advantages.
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Updated on 16 Nov 2024
Resources:
- EnPro Industries, Inc. (NPO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of EnPro Industries, Inc. (NPO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View EnPro Industries, Inc. (NPO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.