The company completed a significant acquisition in September. Up until then Pure had conducted similar monitoring services for oil and gas pipelines, on a limited scale. That unit comprised about 7% of sales. The acquisition tripled that revenue run rate, expanded the customer base, and provided key technologies and services. Oil and gas pipeline construction is surging to accommodate the fracking revolution. Older pipelines are running at capacity, moreover, making preventative maintenance more essential. Only a small percentage of the leak detection market has been penetrated to date. The combined unit could grow 25% annually or more well into the decade.
Meantime, demand for water monitoring is accelerating, too. The threat of droughts is causing utilities to manage their systems more efficiently. But many are close to 100 years old. Upgrades certainly have been made over the years. Still, a lot of systems are aging and require close attention to prevent major breaks. International business offers additional opportunity. Many systems are groaning under the weight of expanding populations and modernized economies. Water use tends to correlate with GDP growth. To date international revenue has been modest. But marketing efforts are being ramped up to make a deeper penetration over the coming years.
We estimate 2014 earnings will advance 82% to $.20 a share (Canadian). Sales tend to be stronger in the second half as utilities implement their annual plans. That sequential improvement could propel full year sales to $78 million (+28%). Next year, bolstered by the acquisition, sales could rise 35% to $105 million to support a 50% increase in earnings ($.30 a share). Pure faces lots of indirect competition in the water area from engineering companies, which specialize in replacing big sections of pipe. Patents and experience provide a competitive barrier in the company's niche. Technologies exist to monitor oil and gas pipelines (so-called "pigs"). Pure's work with those and provide an overall improvement in performance and lower cost.
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