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Milacron (MCRN) Poised to Grow Despite Segmental Concern
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On Sept 14, 2016, we issued an updated research report on Milacron Holdings Corp. . Milacron Holdings is a global leader in the manufacture, distribution, and service of highly engineered and customized systems used in the plastic technology and processing industry.
Looking back at Milacron’s second-quarter results, the company reported second-quarter fiscal 2016 adjusted earnings per share of 41 cents, a 17% improvement year over year. Backlog was $249.9 million as of Jun 30, 2016, a $38.3 million increase from Dec 31, 2015. The increase was predominantly backed by strength in the North-American equipment.
During its second-quarter conference call, Milacron retained its fiscal 2016 guidance of 0–2% organic sales growth and adjusted EBITDA margins between 18.5% and 19.0%. Revenue growth will be driven by underlying market growth in key segments, geographic expansion of certain product lines, continued penetration of hot runners, and incremental share gain from new products.
Since the past two years, Milacron has undertaken a number of organizational redesign and cost-reduction initiatives to improve its cost structure and operating flexibility. These actions are expected to yield approximately $35 million of annual run-rate cost savings by the end of 2017. Management anticipates an incremental $14 million-$18 million in total annualized cost savings in 2016 and 28 million-$31 million in total annualized cost savings in 2017.
The key drivers leading to the cost reductions include realigning the overall cost structure, consolidating sales offices and call centers, and optimizing the manufacturing footprint. This will lead to an expansion of the operating margin.
Further, the company’s breakthrough Klear Can technology will be a game changer given its edge over traditional metal clans. Additionally, given that demand for a diverse range of finished plastic products is on the rise in many markets, Milacron is well poised to capitalize on this growth considering its strong global presence.
The company has made significant investments in China and India, noting the projected growth rates of the plastic business in these markets. Milacron plans to continue expanding its manufacturing capabilities, while also enhancing technical, marketing and sales efforts.
On the flipside, In the Advanced Plastic Processing Technologies segment, pricing pressure remains a headwind driven by a combination of the competitive, low-growth environment in North America as well as broader commodity deflationary headwinds. The Melt Delivery and Control Systems (MDCS) segment will remain fairly stable sequentially, though the timing of results may be difficult to predict as the business is fairly short cycle and customer deferrals may increase if uncertainty regarding the business cycle mounts.
Another point of concern is that approximately 50% of Milacron’s sales were attributable to operations outside the United States. Thus, considerable changes in the value of the Canadian dollar, Euro, Chinese yuan renminbi and Indian rupee compared to the U.S. dollar could have an adverse effect on Milacron’s financial condition and operation results.
Milacron currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Johnson Controls International plc (JCI - Free Report) , Columbus McKinnon Corp. (CMCO - Free Report) , and ACCO Brands Corp. (ACCO - Free Report) . While Johnson Controls International sports a Zacks Rank #1 (Strong Buy), Columbus McKinnon and ACCO Brands carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Milacron (MCRN) Poised to Grow Despite Segmental Concern
On Sept 14, 2016, we issued an updated research report on Milacron Holdings Corp. . Milacron Holdings is a global leader in the manufacture, distribution, and service of highly engineered and customized systems used in the plastic technology and processing industry.
Looking back at Milacron’s second-quarter results, the company reported second-quarter fiscal 2016 adjusted earnings per share of 41 cents, a 17% improvement year over year. Backlog was $249.9 million as of Jun 30, 2016, a $38.3 million increase from Dec 31, 2015. The increase was predominantly backed by strength in the North-American equipment.
During its second-quarter conference call, Milacron retained its fiscal 2016 guidance of 0–2% organic sales growth and adjusted EBITDA margins between 18.5% and 19.0%. Revenue growth will be driven by underlying market growth in key segments, geographic expansion of certain product lines, continued penetration of hot runners, and incremental share gain from new products.
Since the past two years, Milacron has undertaken a number of organizational redesign and cost-reduction initiatives to improve its cost structure and operating flexibility. These actions are expected to yield approximately $35 million of annual run-rate cost savings by the end of 2017. Management anticipates an incremental $14 million-$18 million in total annualized cost savings in 2016 and 28 million-$31 million in total annualized cost savings in 2017.
The key drivers leading to the cost reductions include realigning the overall cost structure, consolidating sales offices and call centers, and optimizing the manufacturing footprint. This will lead to an expansion of the operating margin.
Further, the company’s breakthrough Klear Can technology will be a game changer given its edge over traditional metal clans. Additionally, given that demand for a diverse range of finished plastic products is on the rise in many markets, Milacron is well poised to capitalize on this growth considering its strong global presence.
The company has made significant investments in China and India, noting the projected growth rates of the plastic business in these markets. Milacron plans to continue expanding its manufacturing capabilities, while also enhancing technical, marketing and sales efforts.
On the flipside, In the Advanced Plastic Processing Technologies segment, pricing pressure remains a headwind driven by a combination of the competitive, low-growth environment in North America as well as broader commodity deflationary headwinds. The Melt Delivery and Control Systems (MDCS) segment will remain fairly stable sequentially, though the timing of results may be difficult to predict as the business is fairly short cycle and customer deferrals may increase if uncertainty regarding the business cycle mounts.
Another point of concern is that approximately 50% of Milacron’s sales were attributable to operations outside the United States. Thus, considerable changes in the value of the Canadian dollar, Euro, Chinese yuan renminbi and Indian rupee compared to the U.S. dollar could have an adverse effect on Milacron’s financial condition and operation results.
Milacron currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Johnson Controls International plc (JCI - Free Report) , Columbus McKinnon Corp. (CMCO - Free Report) , and ACCO Brands Corp. (ACCO - Free Report) . While Johnson Controls International sports a Zacks Rank #1 (Strong Buy), Columbus McKinnon and ACCO Brands carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>