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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 equipment.
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 strong.
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 looking for.
Brian Bolan is an Aggressive Growth Stock Strategist for Zacks.com.
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