ENERFLEX LTD. $11.23 - Toronto symbol EFX

ENERFLEX LTD. $11.23 (Toronto symbol EFX; TSINetwork Rating: Extra Risk) (403-387-6377; www.enerflex.com; Shares outstanding: 79.0 million; Market cap: $924.9 million; Dividend yield: 3.0%) rents and sells equipment and services for natural gas production, including compression and processing plants, refrigeration gear and power generators.

On June 30, 2014, the company closed its $431- million U.S. acquisition of two businesses owned by privately held Axip Energy Services: an international contract compression and processing subsidiary and a division that provides aftermarket services.

In the three months ended June 30, 2015, Enerflex’s revenue fell 8.3%, to $389.7 million from $424.9 million a year earlier. But earnings per share more than doubled, to $0.34 from $0.15. International contributions from the Axip businesses pushed up earnings and almost offset weaker revenue in the U.S. and Canada. However, falling oil and gas prices are now hurting the company’s orders.

Acquisition, cost cuts steady earnings

Enerflex booked just $86.5 million of orders in the latest quarter, down 79.1% from $414.3 million a year earlier. Its backlog now stands at $532.7 million, down 38.6% from $867.9 million a year ago.

In response to the lower bookings, the company has reduced costs, including laying off 600 of its 3,400 employees since the start of this year. These measures, plus the Axip operations’ international growth prospects (especially in the Middle East) should still let Enerflex earn $1.04 a share in 2015. The stock trades at 10.8 times that estimate. It yields 3.0%.

Enerflex is still a buy.

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