View more in

Why Shares of Encore Wire Are Skyrocketing Today

The Motley Fool
The Motley Fool
  • Encore Wire smashed Q2 2021 top- and bottom-line estimates.
  • The company is in great financial health.

What happened

Reporting second-quarter 2021 earnings after the market closed yesterday, Encore Wire (NASDAQ:WIRE) smashed analysts' revenue and earnings estimates, supercharging investors' excitement. The feeling didn't wane overnight as the stock is soaring today in response to the earnings presentation. As of 10:48 a.m. EDT, shares were up 11.6% after having risen as much as 23.3% earlier in the morning.

Whereas Wall Street was expecting Encore Wire to book revenue of $456.5 million and EPS of $1.38, the company reported $744.4 million on the top line and EPS of $8.82.
Image source: Getty Images.

So what

It isn't only the company's success at surpassing analysts' estimates that is delighting shareholders; management's auspicious outlook for the rest of 2021 is also a factor. Addressing the company's growth in its copper unit sales, CEO Daniel Jones said, "We believe we can sustain this volume growth, compared to prior period levels, for the remainder of 2021."

Turning to the balance statement, investors found more reasons to cheer. Encore Wire ended the second quarter of 2021 with no debt on its balance sheet. Taken in concert with the $158 million in cash that it has on hand, the company is in a strong financial position, including a current ratio of 4.6.

The company's interest in financing growth projects organically, eschewing debt, will presumably extend into the near future. According to Jones, Encore Wire will rely on its current cash and future cash flows to fund the capital expenditures it forecasts for the next few years: approximately $160 million in 2021, $150 million in 2022, and $70 million in 2023.

Now what

Clearly, there was a lot for Encore Wire shareholders to celebrate regarding the company's second-quarter performance. Should momentum for the infrastructure bill continue to build, it's possible that its copper and aluminum wire will be in high demand. But considering management's attentiveness to the company's financial well being, Encore Wire should be a stock that infrastructure investors keep on their watch lists.

Comments / 0

Comments / 0