Analysts are projecting big growth for SPX Corporation (SPW) over the next two years as the company leverages its "late cycle" growth.

If consensus estimates materialize, EPS will grow by 27% in 2011 and 32% in 2012.

The company also pays a dividend that yields 1.2%. It is a Zacks #2 Rank (Buy) stock.

About SPX

SPX Corporation is a multi-industry manufacturer of highly specialized, engineered solutions.

It serves three core global markets: infrastructure, process equipment, and diagnostic tools to support three critical needs of modern societies: electricity, processed foods and beverages, and vehicle service.

Revenues for the quarter were divided as follows:

Flow Technology: 37%

Test & Measurement: 19%

Thermal Equipment & Services: 32%

Industrial Products & Services: 13%

Approximately 1/4th of sales were from emerging markets.

Fourth Quarter Results

SPX reported fourth quarter results on February 17. Revenues came in at $1.33 billion, up slightly from $1.32 billion in the fourth quarter of 2009. Organic revenues slid 3.0%, however.

The Test & Measurement segment was the strongest with a 17.4% increase in organic revenues. This growth was driven primarily by increased sales to vehicle manufacturers and their dealer service networks.

Organic revenues for the Thermal Equipment & Services segment fell 16.1%, due in large part to a drop in demand for cooling systems in China.

Gross profit inched up from 29.2% of sales to 29.3% in the quarter. Selling, general and administrative expenses increased, however, from 18.8% of sales to 20.2%.

Meanwhile, adjusted operating income fell 11.8%.

Earnings per share was $1.13, 4 cents ahead of the Zacks Consensus Estimate. This marked the company's ninth consecutive positive earnings surprise.

Strong Growth Ahead

While several industrial stocks saw revenues rebound significantly in 2010, sales growth for SPX was essentially flat. However, analysts are projecting strong organic growth in 2011 and 2012 as many of the company's end markets are considered "late cycle".

The 2011 Zacks Consensus Estimate is $4.58, representing 27% EPS growth. The 2012 consensus estimate currently stands at $6.04, equating to 32% growth.

Estimates have been moving higher over the last several weeks, sending the stock to a Zacks #2 Rank (Buy).

The company reports first quarter results on May 4.


SPX pays a dividend that yields 1.2%. It has paid the same quarterly dividend of 25 cents since 2004, however.

The company's payout ratio is relatively low at 28%, so if the company grows earnings as expected over the next few years, don't be surprised to see the company finally boost its dividend.


The stock is up nearly 50% since late August, but valuation is still reasonable.

Shares trade at 18.0x forward earnings, in-line with its 10-year median forward multiple. It has a PEG ratio of 1.3 based on a long-term growth rate of 13.5%.

The stock also trades at 2.0x book value, a discount to the industry average of 2.3x.

SPX Corporation is headquartered in Charlotte, North Carolina and has a market cap of $4.2 billion.

Todd Bunton is the Growth & Income Stock Strategist for