DOWNERS GROVE, Ill. - Federal Signal Corporation (NYSE: NYSE:FSS), known for its environmental and safety solutions, has finalized the acquisition of Standard Equipment Company, enhancing its aftermarket services and geographic reach. The deal, which closed on Monday, includes an upfront payment of $38.8 million and potential additional earn-out of up to $4.8 million, contingent on financial performance.
Standard Equipment, a prominent distributor since 1969, has been a significant partner for Federal Signal in Illinois and Indiana, offering products like Vactor, Elgin, and TRUVAC. This acquisition is part of Federal Signal's strategic initiative started in 2016 to grow its aftermarket operations, which includes parts, services, rental, and used equipment offerings.
Jennifer L. Sherman, Federal Signal's President and CEO, emphasized the strategic fit, citing Standard's experienced team and deep regional knowledge. She highlighted the potential for targeting new customers and leveraging Standard's presence to enhance Federal Signal's product distribution.
The acquisition promises to bolster Federal Signal's earnings and cash flow starting in 2025. This move is a continuation of the company's growth strategy, aiming to provide comprehensive solutions to municipal, governmental, industrial, and commercial customers.
Federal Signal, founded in 1901 and headquartered in Downers Grove, Illinois, operates globally with a focus on equipment that moves material, cleans infrastructure, and ensures community safety.
This press release statement also contains forward-looking statements regarding the acquisition's anticipated benefits and future financial performance. These statements are subject to various risks and uncertainties, including economic conditions, geopolitical conflicts, regulatory changes, market competition, supply chain issues, and integration challenges following the acquisition.
In other recent news, Federal Signal Corporation announced a strong performance in the second quarter of 2024, with consolidated net sales reaching a record $490 million. This marks an 11% increase from the previous year. The company's operating income and adjusted EBITDA also saw significant growth, rising by 37% to $81.1 million and 29% to $97.7 million respectively. Both the Environmental Solutions Group and the Safety and Security Systems Group reported substantial sales growth.
The company's backlog remained robust at $1.08 billion, indicating positive future prospects. Federal Signal Corporation also raised its full-year adjusted EPS outlook while reaffirming its net sales outlook for the year. The corporation expressed confidence in its growth opportunities, particularly in the aftermarket business and through strategic acquisitions.
These recent developments suggest a promising future for Federal Signal Corporation, as it navigates a high interest rate environment with strategic initiatives. However, the company expects lower margins in the second half of the year due to fewer production days and additional rental fleet investments. Despite these challenges, the company remains optimistic about its long-term prospects.
InvestingPro Insights
Federal Signal Corporation's recent acquisition of Standard Equipment Company aligns well with its strategic focus on growth and aftermarket services expansion. This move is further supported by several key financial indicators and analyst perspectives from InvestingPro.
According to InvestingPro data, Federal Signal has demonstrated strong financial performance, with a revenue growth of 15.6% in the last twelve months as of Q2 2024, reaching $1.81 billion. The company's EBITDA growth of 32.01% over the same period indicates improving operational efficiency, which could be further enhanced by the Standard Equipment acquisition.
InvestingPro Tips highlight that Federal Signal has maintained dividend payments for 11 consecutive years, showcasing its commitment to shareholder returns. This consistent dividend policy, coupled with a current dividend yield of 0.53%, may appeal to income-focused investors.
Additionally, an InvestingPro Tip notes that six analysts have revised their earnings upwards for the upcoming period, suggesting positive expectations for the company's financial performance. This optimism aligns with the company's statement that the Standard Equipment acquisition is expected to be accretive to earnings and cash flow starting in 2025.
The company's strong financial position is further underscored by another InvestingPro Tip indicating that Federal Signal's liquid assets exceed its short-term obligations. This financial stability provides a solid foundation for integrating the new acquisition and pursuing further growth opportunities.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide valuable insights into Federal Signal's investment potential.
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