Market Insight: Gardner Denver Profiting from Expanding Operating Margins
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Gardner Denver (GDI) is involved in the design, manufacture, and marketing of compressor and vacuum products, and fluid transfer products in the United States, Europe, Canada, and Asia. Gardner Denver serves customers through independent distributors and sales representatives, as well as directly to original equipment manufacturers, engineering firms, packagers, and end users. The company was founded in 1993 and is based in Quincy, Illinois.
The company recently announced that it has entered into separate share purchase agreements with the holders of 100 percent of the outstanding shares of CompAir Holdings Limited, a leading global manufacturer of compressed air and gas solutions. The acquisition places a total enterprise value of the business at approximately $395 million, to be paid through a combination of cash and the assumption of existing CompAir debt. The transaction is expected to close in the fourth quarter of 2008. CompAir, headquartered in Redditch, U.K., operates through three business divisions: Industrial, Hydrovane, and Reavell.
Gardner Denver is terrific fundamentally with strong sales growth and ever expanding operating margins. In its latest quarter, the company reported that revenues increased 12 percent over the same quarter in the previous year to $495.7 million and net income increased 19 percent versus the same quarter in the prior year to $50.9 million
Technically the stock has a good profile, projecting a possible move up to the $68 per share area by the end of September. Gardner Denver does have a tradable options market and though they do not provide LEAPS, the option cycle currently extends out to January of 2009, which is more than enough time for the trader to capitalize on this bullish opportunity.
Figure 1: Elliott Wave-4 Buy Pattern for Gardner Denver
(Source: Profit Source)
Happy Trading.
Jeff Neal
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
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