Here's the second installment of our earnings preview for lesser-known companies that are worth a good look (if you missed the first installment, here it is). I like to follow these companies because the volatility that can be created by their results can provide opportunities to take positions in some quality small-cap names.
Beacon Roofing Supply (BECN) is a longtime favorite of mine; it reports this evening. The company is the largest distributor of roofing products in the United States. Over the years, the company has acquired properties to expand its geographic footprint and maximize its logistics and purchasing power. With housing, repair and replacement demand in a steady upcycle, Beacon is in a perfect position. Like sister Pool Corp. (POOL) last week, I expect BECN to deliver strong growth, especially since the company acquired Roofing Supply Group last year from private equity in the largest deal in the company's history. I like the long-term story at BECN and enjoy buying this stock on weakness.
MRC Global (MRC) and NOW (DNOW) will continue to be mired in inventory destocking by large energy customers. However, we should continue to see working capital drawdowns drive solid free cash flow at both companies. Conspiracy theory suggests that these two companies should pursue a combination, especially at this point in the cycle. It would make sense as both companies to seek scale over the long term. That's slightly less exciting than the potential for General Electric (GE) to acquire National Oilwell Varco (NOV) , though.
MRC reports this afternoon and DNOW reports Wednesday morning.
Finally, Hillenbrand (HI) will report Wednesday. This company and its mature casket business, Batesville Casket Company, has been on an acquisition program the last five years. Batesville is not growing much, but generates really solid cash flow that enables this budding multisegment industrial to make strategic acquisitions in industrial equipment. This is one of the "young Danaher DHR" companies on my radar screen. I always like watching progress at Hillenbrand --though lately it has been afar -- due to the cyclical and secular headwinds affecting many of its businesses at present.
