Encore Wire (WIRE) Tops Q2 EPS by 3c, Revenues Beat

Encore Wire (NASDAQ: WIRE) reported Q2 EPS of $0.68, $0.03 better than the analyst estimate of $0.65. Revenue for the quarter came in at $336.8 million versus the consensus estimate of $330.05 million.

Commenting on the results, Daniel L. Jones, Chairman, President and Chief Executive Officer of Encore Wire Corporation, said, “We are pleased with our improved results in the second quarter and on a year to date comparison. There are some key items to note. Net sales dollars increased significantly, in both the quarterly and six month comparisons of 2018 to 2017. The increased top line was driven primarily by higher copper raw material prices. Unit volumes bounced back strongly in the second quarter of 2018 versus the first quarter of 2018, rising 16.5% in copper pounds shipped. Margins increased in both the quarterly and six month comparisons of 2018 versus 2017. One of the key metrics to our earnings is the “spread” between the price of copper wire sold and the cost of raw copper purchased in any given period. The copper spread increased 14.2% in the second quarter of 2018 versus the second quarter of 2017, and increased 12.1% on the six month comparison while declining 1.1% on a sequential quarter comparison. The copper spread expanded 14.2% as the average price of copper purchased increased 18.7% in the second quarter of 2018 versus the second quarter of 2017, while the average selling price of wire sold increased 17.2%. The percentage change on sales is on a higher nominal dollar amount than on purchases and, therefore, spreads change on a nominal dollar basis. The $0.32 increase in sequential quarterly earnings was driven primarily by the strong rebound in unit sales, including an $0.11 positive variance in stock compensation expense in the second quarter of 2018 versus the first quarter of 2018. In aluminum wire, which represented 7.3% of our net sales in the second quarter of 2018, we continued to experience pressure on margins due to import competition from China. We will continue to monitor conditions regarding aluminum wire and will take action to enforce our rights under the U.S. trade remedy laws if we determine that further action is warranted.

The U.S. economy appears strong, as is construction activity. Based on discussions with our distributor customers and their contractor customers, we believe there is a good outlook for construction projects for the next year. We believe our superior order fill rates continue to enhance our competitive position. As orders come in from electrical contractors, the distributors can count on our order fill rates to ensure quick deliveries from coast to coast. Our balance sheet is very strong. We have no long-term debt, and our revolving line of credit is paid down to zero. In addition, we had $102.0 million in cash at the end of the quarter. We also declared another cash dividend during the quarter.

Our low-cost structure and strong balance sheet have enabled us to withstand difficult periods in the past, and we believe they are continuing to prove valuable now. We thank our employees and associates for their outstanding effort and our shareholders for their continued support.”

For earnings history and earnings-related data on Encore Wire (WIRE) click here.

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