TENNANT COMPANY $52 (New York symbol TNC; WSSF Rating: Average) makes a wide variety of industrial floor cleaning equipment. It also makes outdoor street sweepers. Overseas markets account for a third of its sales.
In the third quarter of 2005, Tennant’s earnings jumped to $0.69 a share (total $6.3 million) from $0.11 a share ($1.0 million) a year earlier. However, the year-earlier figure included a $0.20 a share restructuring charge. Sales grew 14.4%, to $137.8 million from $120.5 million.
Tennant’s stock fell to $35 in May 2005, but has gained about 50% since as new industrial floor cleaners have expanded its market share. A new line of carpet cleaning products has also spurred sales.
The stock now trades at 23.6 times the $2.20 a share it will probably earn in 2005. That’s high but not unreasonable in view of Tennant’s domination of its niche market. The $0.88 dividend yields 1.7%.
The company now plans to close a plant in Minnesota, and shift its production to other plants. This will cut Tennant’s pre-tax income by $1 million in both 2006 and 2007, but should save it $1.5 million a year starting in 2008.
Tennant is a buy for aggressive investors.