Following the second-quarter results declared a week before, the shares of Filter product manufacturer CLARCOR Inc. (NYSE: CLC) continue to trade near the 12-month high of $62.84. Since January, the stock has seen a gain of about 20%. Thus, a further rise in the share price is justifiable only when there is a prospect of revenue and earnings growth in the current quarter. In this regard, let us study the earnings report to understand the management’s perspective of what lies ahead for Clarcor.
Net sales during the fiscal 2016 second-quarter declined 9% to $365 million, from $399.8 million in the second quarter of fiscal 2015. However, net sales surpassed the analysts’ consensus of $357.4 million.
Segment-wise, the engine/mobile filtration segment reported revenue of $154.02 million, down from $161.29 million in the prior-year corresponding quarter. The industrial/environmental filtration segment reported second-quarter revenue of $210.95 million, compared to $218.68 million in the last year’s similar quarter.
During the second quarter, the company reported net earnings of $53.4 million or $1.09 per share, up 39% from $38.5 million or $0.76 per share in the similar period of fiscal 2015. Excluding the impact of the litigation award (won case against 3M), the second-quarter earnings declined to $36.1 million or $0.73 per share, from $37.4 million or $0.74 per share in the corresponding quarter last year. The earnings per share, however, topped the analysts’ estimates of $0.68 per share.
As we can understand, the revenue and earnings reported for the fiscal 2016 second-quarter were lower on a y-o-y basis.
The company also gave a discouraging guidance for fiscal 2016. The Franklin, Tennessee-based Clarcor affirmed its previous earnings per share guidance between $2.60 and $2.80. However, it trimmed the operating margin guidance to a range of 13.9% to 14.5%, from 14.1% to 14.7% forecasted earlier. The company also warned that the guidance does not include costs to be incurred from restructuring initiatives. Thus, considering the soft guidance, fundamentally, the share price will remain range-bound with a bearish bias.
Technically, the stock has major and minor support at 60 and 50 respectively. The stochastic reading of about 90 indicates an overbought situation. Thus, we can expect the stock to decline from the current level. So, a trader should consider speculating with a one-touch put option. The strike price for the binary trade should be above the next support at $50.
Considering the current price of about $60, which is nearly 17% higher than the next support level, it is better to allow at least a one month time period for the contract to expire.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
