Every year right about this time I get the itch. For most people that live in the Midwest it’s the itch to get outside and runaround. It’s the urge to shake off that cabin fever that has plagued you for the last four or five months. Maybe that’s why Chicago goes nuts and dyes the river green on St. Patty’s Day. We’ve been locked up for so long we just have to get out there and do something crazy. (That river’s green most of the year anyway.)
I’ve got a different brand of crazy. This time of year I open up the pocketbook, and usually the savings account, and spend money on new summer tires, refilling the nitrous bottle, new stereo equipment, basically anything that will upset my girlfriend. As I thumbed through the racing parts catalogue earlier this week it got me thinking. Maybe I’m not the only one who is cracking open these pages looking for parts.
This winter was by any measure one of the worst in recent history. I took a peak at the average snowfall map and laughed. Chicago is supposed to get between 24 and 36 inches of snow on average. Guess where we are as of last week? 79 inches. It is the 3rd highest total snowfall on record.
Even though my car doesn’t see the snow, the SUVs and pickups with plows attached sure got a whole lot of work this winter. There must be some publicly traded company that sells parts for trucks that plow and I’m sure they are having a great earnings season. What I found was the Captain Obvious of all stock tickers. Take a guess. You got it, PLOW, the ticker for the company Douglas Dynamics (PLOW).
Year over year 4Q saw a 159% increase in sales, mostly attributable to the increase in snowfall early in the season. After living through what happened in 1Q 2014 I would bet that this quarter sees some impressive numbers as well. And while getting a new plow may not be as exciting as a new set of Mickey Thompson 305 Drag Radials, it is good for Douglas Dynamics.
PLOW is a Zacks Rank #1 (Strong Buy) with two analysts raising current year forecasts based on the strong snowy season. Consensus for the year has risen from 79 cents to 95 cents per share. Last quarter’s earnings surprise of 52% is another big reason for the rank.
PLOW just made a huge run from near $14 through previous resistance at $17, approaching $18.50 before finally beginning to pull back. This increased volatility since July of last year was previously unheard of for Douglas Dynamics. A slow, steady uptrend saw appreciation from $13 to $17 without any real scary pull backs at all. The dip down below the 25 day moving average shifted by 5 days (25×5 SMA) in January lasted less than a month.
Currently the stock is still in the middle of an intermediate term uptrend, with the 25×5 below the price and in an upward slope. The extreme overbought stochastics are begging for a further sell off to support. Given the fact that $17 was a level of resistance previously, look for that to be support for PLOW should the stock get back down to that level.
Things have been good across the board for the industry. Right now the AUTO/TRUCK-REPLACEMENT PARTS industry is number one in our Zacks Industry Rank. So perhaps snow plows aren’t the only parts getting replaced this winter. Being the gear head that I am, I find myself following the automakers often.