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A. O. Smith Corporation (AOS) - free report >>
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Actuant Poised for Growth Despite Macroeconomic Headwinds
On Aug 29, 2016, we issued an updated research report on Actuant Corporation . The company is involved in designing, manufacturing and distribution of various industrial products and systems, with operations in more than 30 countries. Despite a successful run of more than a century, the company is facing several risks.
Bullish Factors
Actuant’s unique business model is expected to support its results in the quarters ahead. The model primarily emphasizes on higher cash flow generation, which in turn, enables the company to invest in lucrative innovation and growth projects. It focuses on maintaining good customer relationships by offering innovative products and services, which is expected to enhance its core sales in the near term. Also, Actuant is trying to boost its business via strategic acquisitions. The company also undertakes strategic capital deployment programs to win investor confidence.
Bearish Aspects
Actuant tries to boost its revenues and margins through international business expansion. However, greater internationalization exposes the company to several political, environmental, economic and legal headwinds. Moreover, the company’s operating margin is highly sensitive to persistent price fluctuations of major inputs like brass, steel wire, rubber, steel and plastic resin. This apart, weakness in energy and mining markets has been adversely affecting sales of machinery companies like Actuant. Adding to the woes, each business segment of Actuant faces stiff competition. Extensive business rivalry increases the bargaining power of customers, exposing the company to risks of market share loss.
Stocks to Consider
Actuant currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include ACCO Brands Corporation (ACCO - Free Report) , Alarm.Com Holdings, Inc. (ALRM - Free Report) and AO Smith Corp. (AOS - Free Report) . All the three companies presently hold a Zacks Rank #2 (Buy).
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