Headwaters: Zacks’ Bull of the Day Play

Headwaters (HWSnapshot Report) beat the Zacks Consensus Estimate two days ago extending its streak to 11 in a row. The stock is a Zacks Rank #1 (Strong Buy) and today it is the Bull of the Day.The Numbers

HW beat the Zacks Consensus Estimate of $0.10 by $0.03 for a 30% positive earnings surprise. Revenues came in a little above expectations at $202 million for a 1.5% positive revenue surprise.

Description

Headwaters is a building materials company that provides products and services to building and construction materials sectors. Headwaters was founded in 1987 and is headquartered in South Jordan, Utah.

Earnings History

As noted above, the most recent earnings beat was the eleventh consecutive time the company posted earnings ahead of the Zacks Consensus Estimate. Beats are always good to see, but the numbers that HW has been posting are even better.

The positive earnings surprises of 240%, 145% 17%, 11%, 47% and 30% (respectively) are nothing to shake a stick at. Those are big beats!

Estimates

The FY16 Zacks Consensus Estimate has been moving higher for the most part but has also ticked lower recently. The number stood at $1.08 in January and moved higher to $1.38 in February on the strength of a solid 47% positive earnings surprise.

Since that time estimates have kicked lower twice. Once in March to $1.34 and then again in early May to $1.32. Following the most recent beat we could see analysts move their numbers higher again.

The FY2017 Zacks Consensus Estimate has seen a similar move. The number moved from $1.23 to $1.46 in February, then higher to $1.56 in March. In early May the number ticked lower to $1.53.

Valuation

For the most part, the valuation here looks really good. The forward PE of 13x is well below the 21x industry average, while the price to book multiple of 5.1x is higher than the 4.2x industry average. The 1.4x price to sales multiple is half the 2.8x industry average, so while the numbers are a little mixed on the metrics we normally look at, the overall picture is a positive one.

Normally, I talk a little about growth rates here, but the price and consensus chart is such a good one that I want to jump right to it.

Chart

Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represents analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #1 (Strong Buy) we see that estimates are moving higher.

Follow Brian Bolan on twitter at @BBolan1

Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Stocks Under $10, an investor service , where he recommends the stocks in the portfolio.

Brian also runs the brand new Zacks Game Changers where he looks for stocks that are disrupting their industries and reaping big gains.

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