Savvy Trades and Investments

[jtomm]

LMB ($32.20) Reports Q2 earnings of .46 vs .08 and totally blew away estimates. (I bought around $11 and sold in the mid $16's, oops.) Cash building, debt going down, increasing guidance. I'm now starting to think this might be a $70 to $80 stock in a few years.

I always very much liked to change in business strategy from just being a general contractor for HVAC, putting in bids all across the country . . . . to focusing on owner direct relationships on mission critical systems specifically in 2nd and 3rd tier cities east of the Mississippi. Focused, and much more integrated into the building owners' plans for the future, maintenance, advising on cost-saving opportunities, upgrading equipment, etc. Much better business.

What I missed was incredibly simple: very low outstanding shares, and how much earnings could be affected by a smallish dollar amount improvement in results.

Company only had 11m shares outstanding (with a few acquisitions etc, it'll probably be closer to 12m soon). So every $1 million dollar bottom line improvement is $.08 to $.09 in additional earnings. This is a business that does almost $500m in annual revenue. If they can improve gross margin percentage just slightly on such a big top-line number, it makes a huge difference on EPS. Drop just an additional, say, $4 million to the bottom line via margin improvements, that's like $.32 to $.36 improvement in earnings.

https://www.sec.gov/Archives/edgar/data/1606163/000162828023028584/a2023630ex991pr.htm