Thomas & Betts Corp. (TNB) has seen shares rally as a result of a string of positive earnings surprises. TNB is a Zacks #1 Rank (Strong Buy).

Company Description

Thomas & Betts Corporation (TNB) designs, manufactures, and markets electrical components for industrial, construction, and utility markets. It operates in three segments: Electrical; Steel Structures; and heating ventilation, and air-conditioning (HVAC). The Electrical segment offers connectors, components, and other products.

Estimates Move Higher

TNB has seen recent increases in the Zacks Consensus Estimate for the March 2012 and June 2012 quarters. The two cent increase in the March quarter estimate equates to a 2.3% increase since late October of 2011 when estimates were calling for $0.86 per share in earnings. The June quarter looks shares that sentiment with increase from $0.96 up 2% to $0.98.

Solid History of Earnings Surprises

TNB has seen a solid history of positive earnings surprises. The September 2011 quarter saw a beat of 11 cents which was approximately 12% ahead of the Zacks Consensus Estimate of $0.92. Following that beat, the stock moved higher by almost 9%, denoting the fact that stocks move higher when earnings beat expectations.

Including the September 2011 quarter, TNB has seen a positive earnings surprise in each of its last six quarters.

Topline also produces surprises

Just as expectations for the bottom line have been properly managed, the topline shows a similar history of consistent beats. Back to back beats of more than 3% on the top line have established a good trend and have led to higher expectations. The December 2011 quarter revenue estimate is higher than the September 2011 revenue estimate, a metric that was not true in 2010 as seasonality affects the business.

Valuation

On a price to earnings basis, TNB trades at a premium to the industry on a trailing twelve month basis. On the forward PE, the premium is more pronounced, indicating the higher expectations for TNB compared to the industry. The company trades at a discount to the industry on metrics like price to book at EV/EBITDA.

The Chart

The price and consensus chart below shows that increased earnings expectations have help push the stock higher. Having seen quite a run of late, shares of TNB still have room to run should earnings continue to beat expectations.

Thomas Betts (NYSE:TNB)
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