Actuant (ATU - Analyst Report) has missed in
each of the last three earnings reports and has seen estimate. It
is a Zacks Rank #4 (Sell).
It is the Bear of the Day.
Guiding Lower, Not comparable
Sometimes the Zacks Rank can move lower on a company that is
actually doing just fine. This could be one of those situations,
as Actuant (ATU - Analyst Report) reported a miss, but then guided substantially
The reason for the lowered guidance is the expected sale of the
electric equipment business, a move that was announced in early
June. The removal of this business has caused estimates to drop
Actuant designs and sells industrial products and systems. The
industrial segment provides high-force hydraulic tools, heavy
lifting solutions, production automation solutions, and concrete
stressing products to the general maintenance and repair,
industrial, infrastructure, and production automation markets. The
company was founded in 1910 and is headquartered in Menomonee
Looking to the earnings history, we see three straight misses.
Two times there was a miss of one cent, and the February 2013
quarter was a two cent miss.
Trading Lower After Reporting
Investors might want to take special notice of this idea. In the
session following the earnings report, ATU has fallen in each of
the last five quarters. Ironically, the biggest decrease in
stock price, 7.6%, came after a $0.01 beat following the May 2012
Earnings Estimates Tick Lower
Despite a nice run by the stock, the estimates for ATU have been
moving the other way for some time now. The Zacks Consensus
Estimate for 2013 has moved from $2.28 in September 2012 to $2.18
in December of the same year. A tick lower by one cent happened
in April of 2013 and now the Zacks Consensus Estimate is calling
The same could be said of the 2014 Zacks Consensus Estimate as it
fell from $2.49 in September, to $2.42 in January 2013 down to
$2.41 in May. The recent guidance has pushed that number to
$2.02. Earnings estimate revisions are the largest component of
the Zacks Rank that can influence a change in rank.
The valuation picture for ATU shows the company already trading
at a premium to the industry average on each metric that
investors tend to look at. The trailing PE of 16.5x is higher
than the 13.8x industry average, while the forward PE sports a
bigger premium of 17.7x compared to the 13.4x industry average.
Price to book carries a multiple of 2.4x compared to 2.3x for the
industry average, which is not that much, but still a premium.
The price to sales multiple of 1.7x is also higher than the 0.8x
The price and consensus chart shows a disturbing trend in
earnings estimates. While a big move lower on earnings estimates
can be explained by things like a divestiture, but that could also
end up impacting margins as well. The end idea is that investors
might want to wait to see how everything shakes out before making
an initial or follow on investment in ATU. Other industrial
stocks like Lincoln Electric (LECO) carry a higher Zacks Rank
and might be worth a closer look.
Brian Bolan is a Stock Strategist
for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor
service, a Buy and Hold service where he recommends the
stocks in the portfolio.
Brian is also the editor of Breakout Growth Trader
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