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Quarterly earnings of 40 cents per share plunged 36.5% year over year but surpassed the Zacks Consensus Estimate of 37 cents. Higher revenues and greater operational efficiency drove the company’s quarterly earnings higher.
Revenues, Costs and Margins
Actuant’s net revenue of $305.3 million dipped 4.6% year over year but were above the Zacks Consensus Estimate of $295 million. The quarterly sales were supported by the latest tuck-in acquisition made in the Hydratight business. However, the upside was limited by weakness in the upstream oil & gas, general industrial and agricultural markets.
The company’s cost of sales was $197.8 million in the quarter, down 1.8% year over year. Gross margin decreased 180 basis points (bps) to 35.2%. Selling, administrative and engineering expenses were $70.1 million, up from $69.6 million last year.
For the quarter, the company reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $42.4 million, down from the year-ago tally of $55.7 million.
Balance Sheet and Cash Flow
Actuant exited the fiscal third-quarter with cash and cash equivalents of $137.1 million, down from $168.8 million as of Aug 31, 2015. Long-term debt was $573.1 million, down from $584.3 million at the end of fiscal 2015.
Actuant generated cash worth $46.1 million from its operating activities as against $40.5 million a year ago. Capital spending totaled $4.6 million, up from $4.4 million in third-quarter fiscal 2015.
During the quarter, Actuant repurchased 0.2 million common shares for $5 million.
Segmental Performance
Revenues from the Industrial Segment fell 7.4% year over year to $95.8 million. The decline was due to poor demand from conventional industrial niche markets and unfavorable currency translation.
Energy Segment revenues inched up 2% year over year to $101.3 million. Revenues were hurt by the appreciation of the U.S. dollar and weak upstream capital expenditure made by companies engaged in drilling, field development and exploration. However, segmental revenues marginally increased year over year due to higher core sales generated from the Hydratight acquisition.
Revenues from the Engineered Solution Segment decreased 7.7% year over year to $108.3 million. The ongoing original equipment manufacturer (OEM) destocking initiatives and poor agriculture and off-highway equipment demand resulted in the decline.
Outlook
Actuant notes that the currently weak pricing and demand conditions in the upstream oil & gas, agriculture and general industrial markets are weighing over its top line and bottom line. Nevertheless, the company hopes to mitigate the negatives on the back of lower costs, superior services, strategic acquisitions and share repurchases.
However, the company anticipates a 9–10% decline in core sales and hence, has projected fiscal fourth-quarter revenues in the range of $270–$280 million. Earnings for the upcoming quarter have been estimated to be between 28 cents and 33 cents. Fiscal 2016 revenues are expected to be around $1.150 billion, which lies in the upper end of the previous projection. Earnings, on the other hand, are estimated at $1.20–$1.25 per share as against $1.25–$1.35 guided earlier.
Zacks Rank and Growth Prospects
Actaunt currently carries a Zacks Rank #3 (Buy). The company intends to improve its growth prospects via strategic acquisitions. The company also plans to utilize its increased liquidity to buy back shares to boost earnings. However, pricing and currency headwinds remain concerns. The company saw no estimate revision in the Zacks Consensus Estimate over the last 60 days as the Zacks Consensus Estimate remained unchanged at $1.24 per share for fiscal 2016 and $1.36 per share for 2017.
Though Actaunt’s fiscal third-quarter results surpassed our estimates, the stock slipped 8.8% to $24.67 on Jun 22, 2016, due to year-over-year decline in earnings and revenues.
The persistent weakness in energy and mining market has been weighing over the demand for industrial or machinery products offered by companies like Actaunt. Moreover, a stronger U.S. dollar is increasing the competitive power of the smaller rivals operating in low-cost nations. Hence, we believe that Actuant needs to work on greater innovation, business diversification and strategic inorganic and organic initiatives to boost its financial health.
Stocks to Consider
Some better-ranked stocks in the industry include Kennametal Inc. (KMT - Free Report) , Stanley Black & Decker, Inc. (SWK - Free Report) and Sandvik AB (SDVKY - Free Report) . Both Stanley Black & Decker, Inc. and Sandvik AB hold a Zacks Rank #2 (Buy), while Kennametal Inc. sports a Zacks Rank #1 (Strong Buy).
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Actuant (ATU) Q3 Earnings and Revenues Beat, Decline Y/Y
Premium diversified machinery company Actuant Corporation reported better-than-expected third-quarter fiscal 2016 results.
Quarterly earnings of 40 cents per share plunged 36.5% year over year but surpassed the Zacks Consensus Estimate of 37 cents. Higher revenues and greater operational efficiency drove the company’s quarterly earnings higher.
Revenues, Costs and Margins
Actuant’s net revenue of $305.3 million dipped 4.6% year over year but were above the Zacks Consensus Estimate of $295 million. The quarterly sales were supported by the latest tuck-in acquisition made in the Hydratight business. However, the upside was limited by weakness in the upstream oil & gas, general industrial and agricultural markets.
The company’s cost of sales was $197.8 million in the quarter, down 1.8% year over year. Gross margin decreased 180 basis points (bps) to 35.2%. Selling, administrative and engineering expenses were $70.1 million, up from $69.6 million last year.
For the quarter, the company reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $42.4 million, down from the year-ago tally of $55.7 million.
Balance Sheet and Cash Flow
Actuant exited the fiscal third-quarter with cash and cash equivalents of $137.1 million, down from $168.8 million as of Aug 31, 2015. Long-term debt was $573.1 million, down from $584.3 million at the end of fiscal 2015.
Actuant generated cash worth $46.1 million from its operating activities as against $40.5 million a year ago. Capital spending totaled $4.6 million, up from $4.4 million in third-quarter fiscal 2015.
During the quarter, Actuant repurchased 0.2 million common shares for $5 million.
Segmental Performance
Revenues from the Industrial Segment fell 7.4% year over year to $95.8 million. The decline was due to poor demand from conventional industrial niche markets and unfavorable currency translation.
Energy Segment revenues inched up 2% year over year to $101.3 million. Revenues were hurt by the appreciation of the U.S. dollar and weak upstream capital expenditure made by companies engaged in drilling, field development and exploration. However, segmental revenues marginally increased year over year due to higher core sales generated from the Hydratight acquisition.
Revenues from the Engineered Solution Segment decreased 7.7% year over year to $108.3 million. The ongoing original equipment manufacturer (OEM) destocking initiatives and poor agriculture and off-highway equipment demand resulted in the decline.
Outlook
Actuant notes that the currently weak pricing and demand conditions in the upstream oil & gas, agriculture and general industrial markets are weighing over its top line and bottom line. Nevertheless, the company hopes to mitigate the negatives on the back of lower costs, superior services, strategic acquisitions and share repurchases.
However, the company anticipates a 9–10% decline in core sales and hence, has projected fiscal fourth-quarter revenues in the range of $270–$280 million. Earnings for the upcoming quarter have been estimated to be between 28 cents and 33 cents. Fiscal 2016 revenues are expected to be around $1.150 billion, which lies in the upper end of the previous projection. Earnings, on the other hand, are estimated at $1.20–$1.25 per share as against $1.25–$1.35 guided earlier.
Zacks Rank and Growth Prospects
Actaunt currently carries a Zacks Rank #3 (Buy). The company intends to improve its growth prospects via strategic acquisitions. The company also plans to utilize its increased liquidity to buy back shares to boost earnings. However, pricing and currency headwinds remain concerns. The company saw no estimate revision in the Zacks Consensus Estimate over the last 60 days as the Zacks Consensus Estimate remained unchanged at $1.24 per share for fiscal 2016 and $1.36 per share for 2017.
Though Actaunt’s fiscal third-quarter results surpassed our estimates, the stock slipped 8.8% to $24.67 on Jun 22, 2016, due to year-over-year decline in earnings and revenues.
ACTUANT CORP Price, Consensus and EPS Surprise
ACTUANT CORP Price, Consensus and EPS Surprise | ACTUANT CORP Quote
Insights
The persistent weakness in energy and mining market has been weighing over the demand for industrial or machinery products offered by companies like Actaunt. Moreover, a stronger U.S. dollar is increasing the competitive power of the smaller rivals operating in low-cost nations. Hence, we believe that Actuant needs to work on greater innovation, business diversification and strategic inorganic and organic initiatives to boost its financial health.
Stocks to Consider
Some better-ranked stocks in the industry include Kennametal Inc. (KMT - Free Report) , Stanley Black & Decker, Inc. (SWK - Free Report) and Sandvik AB (SDVKY - Free Report) . Both Stanley Black & Decker, Inc. and Sandvik AB hold a Zacks Rank #2 (Buy), while Kennametal Inc. sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>