ENGlobal Corp (ENG) avoided major damage from hurricane Ike and just broke out of a bearish trend. Current-year estimates are projecting a 87% increase in earnings, but the company remains fairly priced with a PEG of 0.8.

Company Description

ENGlobal Corporation provides engineering, automation systems, field inspection, and land management and regulatory services principally to the petroleum refining, petrochemical, pipeline, production, and process industries throughout the United States and internationally.

From its roots as a small, local engineering and design company to its current position as an international organization, ENGlobal has always focused on providing innovative, cost-effective solutions. The company is headquartered in Houston, Texas, with approximately 2,900 employees, and a market cap of $340 million.

Record Second Quarter

ENGlobal reported revenue of $136 million, which is a 52% year-over-year increase. The record mark for revenue was announced on Aug 7. Organic growth drove the increase in revenue since last quarter.

The company earned 24 cents per share during the second quarter, 41% higher than the consensus estimate of 17 cents. ENGlobal’s profit margin is now 8.5%, up from 7.7% on year ago, easily surpassing the target of 8%.

Recovering from Hurricane Ike

On Sep 22 ENGlobal announced that 85% of its 900 employees affected by Ike were back to work. The hurricane forced closures to 8 facilities represent about one third of the company’s locations. While major damage was avoided, commercial power has been restored to 7 locations and the 8th is running on generators.

Estimates Are Up

The consensus estimate for the current year is 84 cents per share, up 87% from 2007. Analysts are expecting 25 cents per share for the current quarter and 21 cent next quarter. These estimates represent a 79% and 320% year-over-year increase, respectively.

With a PEG ratio of .8, ENGlobal is right in line with the industry. However, the company is well above the average return on equity, currently 27% compared to the industry average of 10%.

ENGlobal currently has 2 consecutive earnings surprises heading into its next announcement on Nov 5.

The Chart

Shares of ENG broke out of a bearish trend in mid September. The stock’s volatility is due to its indirect energy exposure.

Content Courtesy: Zacks Investment Research

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