TENNANT CORP. $47 (New York symbol TNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 18.5 million; Market cap: $869.5 million; Price-to-sales ratio: 1.2; Dividend yield: 1.5%; TSINetwork Rating: Average; www.tennantco.com) makes industrial floor-cleaning equipment, including scrubbers, sweepers and polishers. It also manufactures cleaning gear for garages, stadiums, parking lots and city streets.
The company continues to develop floor cleaners and related products that use its ec-H2O technology, which uses electricity to make tap water act like a detergent. That eliminates the need for soaps and cleaning agents, and lowers the machine’s operating costs.
Even so, Tennant’s sales fell 2.0% in 2012, to $739.0 million from $754.0 million in 2011. Overseas markets supply around 35% of Tennant’s sales, and the high U.S. dollar hurts the contribution of its foreign operations. On a constant-currency basis, sales were flat. The company sold $141 million worth of ec-H20 scrubbers in 2012 (or 19.1% of total sales). That’s up 0.7% from $140 million (18.6% of sales) in 2011.
Even with the lower sales, earnings rose 5.2%, to $39.7 million from $37.7 million. That’s because the company earns higher profits on its eco-friendly products.
The company spent $25.3 million on share buybacks in 2012. Due to fewer shares outstanding, earnings per share gained 6.7%, to $2.08 from $1.95.
Tennant spends around 4% of is sales on research. That let it launch 17 new products in the fourth quarter of 2012. The company plans to launch an additional 25 products in 2013.
That should push up Tennant’s earnings to $2.35 a share this year. The stock trades at 20.0 times that estimate. That’s a high p/e ratio, but still acceptable in light of the company’s unique products, which give it an advantage over competitors. The $0.72 dividend yields 1.5%.
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