IBD 50 Stocks To Watch: Atkore Near Buy Point After 730% Surge And Blowout Earnings

Atkore, featured in today’s IBD 50 Stocks To Watch, is building the right side of a base as the infrastructure play approaches a buy point.


The Harvey, Ill.-based company also delivered a big earnings and sales beat early Tuesday, which sent shares 13% higher in heavy volume.

Atkore (ATKR) makes electrical conduits, cable management systems, metal framing and related products used in commercial construction projects worldwide. That puts it in position as a prime infrastructure play as the U.S. and rest of the world recover from the coronavirus pandemic.

Atkore reported Q2 adjusted earnings of $3.96 a share on revenue of $853.7 million, well above forecasts for $3.07 a share on revenue of $722.8 million. That marked a third straight quarter of triple-digit profit growth. Sales growth accelerated to 122% from 40% and 14% in the prior two quarters.

“We are continuing to benefit from strong demand and outstanding execution amidst industry supply constraints,” President and CEO Bill Waltz said in a statement. “The volume growth was across many product categories, and we are optimistic about the continued end market demand across multiple verticals.”

Stocks To Watch: Higher Outlook

Atkore raised its full-year adjusted EBITDA forecast to $855 million-$875 million and its adjusted net income per share outlook to $12.25-$12.55.

IBD Stock Checkup assigns Atkore a highest possible 99 Composite Rating, which gives investors a quick way to gauge a stock’s key growth traits. That puts it at the top of the 42-stock construction products group, which includes Builders FirstSource (BLDR) and Mohawk Industries (MHK).

A 99 Earnings Per Share Rating, part of the overall Composite score, also leads the group and makes Atkore one of the top stocks to watch. It reflects a five-year compound earnings growth rate of 44%. Analysts expect EPS to soar 178% this year before a 46% drop in 2022.

On the technical front, a 96 Relative Strength Rating puts Atkore in the top 4% of all stocks. Its relative strength line, which compares a stock’s performance to the S&P 500, is close to a new high. A move to a high ahead of or at a breakout would be an even more bullish signal.

Buy Point In Sight

Atkore is working on the right side of a 13-week consolidation. It’s about 7% away from a 90.18 buy point, according to IBD MarketSmith chart analysis. The base is second stage, which means there could be plenty of room to run. Stocks tend to make their biggest advances out of such early stage bases.

The stock has rallied more than 100% this year. And that’s on top of a 279% rally from its March 2020 coronavirus crash lows to its Dec. 31 close. From the March 2020 low to its May 10 high, Atkore surged 730%.

But if Atkore appears to be turning south, look for warning signs. For instance, a big breach of the 50-day moving average (or 10-week on a weekly chart) in heavy volume would be a sell signal.

Follow Nancy Gondo on Twitter at @IBD_NGondo


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