Douglas Dynamics: Zacks’ Bull of the Day Play

It may only be the beginning of November but the winter cold is already starting to creep in. The Halloween pumpkins aren’t even rotten yet and already I’m hearing the dreaded phrase “Polar Vortex” creep back into conversations. For those of us north of the Mason-Dixon it feels like we just thawed out from last year. Well ready or not, old man winter is here. While most of us are downright disgusted with the thought, there are a few companies out there that are very excited to see the mercury drop. Among them is our “Bull of the Day” Douglas Dynamics (PLOWSnapshot Report).

Headquartered in Milwaukee, Wisconsin, Douglas Dynamics designs, manufactures and sells snow and ice control equipment for light trucks. This equipment is comprised of snowplows and sand and salt spreaders. The company sells its products under the Western, Fisher, Blizzard, Snowex, Turfex and Sweepex brands. Currently the company is a Zacks Rank #1 (Strong Buy).

The third quarter was a great one for PLOW. Quarterly Net Sales increased 52% year over year to a record $78.8 million. It had record EPS of 47 cents in Q3, an increase of 45 over last year. Adjusted EBITDA increased 118% to a third quarter record of $22.2 million.

Chairman, President and CEO James L. Janik commented, “So far, 2014 has exceeded our internal expectations with strong financial performance reflecting a favorable market environment, strength across our portfolio, and successful execution of our strategy. During the quarter, we achieved record profitability, which is a testament to our relentless drive to improve efficiency and productivity through our manufacturing operations. We are focused on refining every one of our business processes, which will allow us to increase cash flow and invest in future growth opportunities to drive long-term shareholder value.”

A big reason behind Douglas Dynamics’ sweet Zacks Rank is the “Surprise” category. The latest 16 cent beat marked the fourth consecutive upside earnings surprise for the stock. This will likely force estimate revisions to the upside over the coming weeks heading into next quarter. Fourth quarter is historically a stronger period for Douglas Dynamic as the winter kicks into full gear and their products are more in demand.

There is a lot of positive momentum in the stock price right now. After hitting a 52-week low down below $14.25 in February of this year, PLOW has been on the rampage. The stock has seesawed its way up to $22 on earnings. Wednesday a sharp pullback helped bring the stock back down below $20. Thursday saw the return of the rally with shares adding 77 cents and closing the day at $20.76.

Even at these increased levels the stock isn’t severely overbought with stochastics below 50. The pullback took the stock below the 20 day moving average and Thursday’s action may prove to be the beginning of the next leg higher. After last earnings report PLOW rose from the low $17s all the way above $21. With the stock currently below $21, the upside potential for the stock is well beyond $24.

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