Actuant (ATU - Analyst Report)
has a good history of positive earnings surprises and an
attractive valuation. The stock is a Zacks #2 Rank (Buy).
Actuant Corporation designs, manufactures, and distributes
industrial products and systems worldwide. The company's
Industrial segment provides hydraulic and mechanical tools
including hydraulic tools and heavy lifting solutions. Its Energy
segment offers joint integrity products which consist of hydraulic
torque wrenches, bolt tensioners, and portable machining
Solid Earnings History
Of the last seven earnings reports, ATU has posted six beats and a
one meet. The company reported in line earnings for the February
2011 quarter, but the following three earnings reports have been
A $0.05 beat for the May 2011 quarter saw a 6.7% move in the
stock. The August 2011 quarter saw earnings $0.03 ahead of the
Zacks Consensus Estimate translated into a 6.9% move for the
stock. The $0.07 or 16% beat for the November 2011 quarter pushed
the stock higher by 9.8%
Topline Tops Expectations
On the last two reports, the company has posted solid bottom line
results as discussed above. One of the key drivers in each of
those beats has been the topline or revenue for the company. The
August 2011 quarter came in $10 million above expectations or a 2%
beat. The November 2011 quarter had revenue top the Zacks
Consensus Estimate by $18 million or 4.9%
Estimates Moving Higher
Analysts have been moving estimates higher for ATU over the last
several months. In November of 2011, analysts expected $1.89 in
earnings for 2012. That estimate was moved higher to $1.97 in
January 2012 and is up to $1.98 currently.
2013 Estimates have moved from $2.11 in November 2011 to its
current level of $2.17. Given the recent momentum of bigger and
better beats, it is a pretty safe bet that 2013 estimates will
continue to move higher.
ATU has a mixed valuation picture. The stock trades are a
discount to the industry average in terms of trailing twelve
months PE, and price to book. The discount of prior earnings is greater than the discount exhibited in price to book. The
stock trades at a premium to the industry average in terms of
forward PE, with a 14x multiple compared to the 11x industry
average. A premium is also seen in the price to sales metric, but
it is not that significant.
A look at the price and consensus chart shows how earnings
estimate expectations have risen over the last few years.
Normally, when we see the stock below the earnings lines, it
implies the stock is undervalued. A solid history of earnings
beats added to the recent momentum of bigger beats coupled with a
good valuation makes ATU just what aggressive growth investors are
Brian Bolan is an Aggressive Growth Stock Strategist
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