Gardner Denver (GDI): Share price defines bullish 'pennant'

Posted Apr 29th 2008 2:27PM by Larry Schutts
Filed under: Earnings Reports, Analyst Upgrades and Downgrades, Technical Analysis, Stocks to Buy

Gardner Denver (NYSE: GDI) makes compressors, pumps, blowers and other fluid transfer equipment for a variety of industrial applications. Its compressors are used with air tools and aid in the processing of petroleum and pharmaceuticals. Its blowers are used to power pneumatic conveying and wastewater aeration systems. Its pumps support oil and natural gas drilling, vacuum applications, water removal and filtering. The firm also provides loading arms, swivel joints, couplers and access equipment used in loading and unloading ships, tank trucks and rail cars. Ingersoll-Rand (NYSE: IR) and EnPro Industries (NYSE: NPO) are competitors.

Investors were pleased last week, when the company reported Q1 EPS of 95 cents and revenues of $495.7 million. Analysts had been looking for 80 cents and $474.4 million. Cash provided by quarterly operating activities was 76% higher than in Q1 2007. Management also guided Q2 EPS to 88-92 cents (85 cent consensus) and FY08 EPS to $3.65-$3.75 ($3.36 consensus). Friedman Billings subsequently reiterated its "outperform" rating on the stock.

GDI shares popped on the news and are now forming a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Altogether, brokers recommend the issue with three "strong buys", one "buy" and four "holds". The GDI P/E ratio (12.10), Price to Sales ratio (1.30), Price to Cash Flow ratio (9.21) and Net Profit Margin (11.08%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 93% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $27.35 and $49.20. A stop-loss of $41.00 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

Tags: fundamental analysis, FundamentalAnalysis, Gardner Denver, GardnerDenver, GDI, momentum, pennant, technical analysis, TechnicalAnalysis