Back to top

Analyst Blog

On Jul 2, 2013, we downgraded our recommendation on the machinery company, Actuant Corporation (ATU - Analyst Report) to Underperform from Neutral, based on the company’s gloomy future prospects.

Why the Downgrade?

Actuant’s Engineered Solutions segment has been undergoing a difficult phase of operation, harming the total revenue of the company. Core sales in the segment declined 10% year over year in the fiscal third quarter 2013, due to lower volumes. This trend is expected to continue in the near term as well.  

Actuant’s operations are scattered over more than thirty countries worldwide, making it prone to foreign currency exchange risk. Moreover, since the company receives revenues in the currency terms of the region of operations, strengthening of the U.S. dollar makes it difficult for the company’s revenue generation . 

With the divestiture of the Electrical segment combined with higher free cash flow generation, Actuant expects to have roughly $1 billion worth of capital available for deployment, which the company intends to use for future acquisitions. With such a large amount of cash at its disposal, a larger acquisition can be anticipated, which may also increase the potential risks, such as lack of synergy.

Subsequent to the results, Actuant has been facing a downward revision of most of its estimates. Zacks Consensus Estimate for fiscal 2013 declined 13.4% to $1.88 over the last thirty days. For fiscal 2014, the Zacks Consensus Estimate now stands at $2.02, declining 16.2%, over the same timeframe.

Other Stocks to Consider

Not all machinery stocks are performing as poorly as Actuant. Other stocks which are performing better and possess a favorable Zacks Rank include Lincoln Electric Holdings Inc. (LECO - Analyst Report) carrying a Zacks Rank #1 (Strong Buy); also Applied Industrial Technologies, Inc. (AIT - Snapshot Report) and Broadwind Energy, Inc. (BWEN - Snapshot Report) carry a Zacks Rank #2 (Buy), each.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ALASKA AIR… ALK 96.79 +2.26%
PILGRIMS PR… PPC 29.50 +1.90%
SASOL LTD -… SSL 58.83 +1.78%
NSK LTD -UN… NPSKY 26.70 +1.52%
CTPARTNERS… CTP 10.99 +1.29%