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Actuant (ATU) Beats Q1 Earnings, Raises FY17 EPS Guidance

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Diversified machinery company, Actuant Corporation , reported its first-quarter fiscal 2017 (ended Nov 30, 2016) earnings.

Amid dismal market conditions, the Zacks Rank #3 (Hold) stock is poised to grow on the back of prompt restructuring moves. The stock has been performing better than most of its industry peers, for the last 30 days.

Since Nov 21, 2016, Actaunt’s shares recorded a return of 7.71% as against the negative return of 0.41% provided by the Zacks categorized Machine-Tools & Related Products industry.

Quarter Details

Quarterly adjusted earnings came in at 20 cents per share, down 35.5% year over year. However, the bottom line surpassed the Zacks Consensus Estimate of 17 cents.

Revenues

Actuant’s first-quarter fiscal 2017 net revenue of $265.8 million declined 12.9% year over year and also fell short of the Zacks Consensus Estimate of $268 million. The downside was stemmed by poor segmental performance. Core sales during the quarter were down 14%, year over year. In addition, adverse foreign currency movements hurt sales by 1%, while acquisition and divestitures added 2%.     

Costs and Margins

The company’s cost of sales was $172.7 million in the quarter, down 12.1% year over year.

Gross margin contracted 60 basis points (bps) to 35%. The decline was witnessed due to lower sales volumes.

Selling, administrative and engineering expenses were $68.6 million, down from $72.9 million recorded in first-quarter fiscal 2016.

For the reported quarter, the company reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $30.7 million. The figure was down from the year-ago tally of $41.6 million.

Balance Sheet and Cash Flow

Actuant exited the fiscal first quarter with cash and cash equivalents of $176.9 million, up from $179.6 million as of Aug 31, 2016. Long-term debt was $554.4 million, down from $561.7 million at the end of fiscal 2016.

In the quarter, Actuant generated cash worth $12.1 million from its operating activities as against $21.3 million a year ago. Capital spending totaled $5.1 million, down from $5.5 million in first-quarter fiscal 2016.

Segmental Performance

Revenues from the Industrial segment edged down 1.8%, year over year, to $87.3 million. The year-over-year downfall came on the back of core sales decline.

Energy Segment revenues plunged 25.7% year over year to $84.6 million. Revenues were affected by the appreciation of the U.S. dollar and lower sales from the Cortland, Hydratight and Viking businesses.  

Revenues from the Engineered Solution segment decreased 8.3% year over year to $93.9 million. The year-over-year decline was experienced due to soft demand from the agricultural and off-highway original equipment manufacturers.

Guidance for Second-Quarter Fiscal 2017

Actuant anticipates sales within the range of $250–$260 million for the upcoming quarter. Earnings are projected to lie within the range of 8–13 cents per share. The company has estimated the results after considering the tepid conditions prevailing in the end markets.  

Outlook

Amid a lackluster business environment, Actuant is aimed at boosting its earnings, sales and cash flow in the quarters ahead, on the back of higher demand and meaningful restructuring moves. On grounds of these optimistic aspects, Actuant has raised its earnings guidance for fiscal 2017 from $1.00–$1.20 to $1.10–$1.30 per share.

The company reaffirmed its revenue guidance at $1.075-1.125 billion range for full-year fiscal 2017. Core sales are estimated to be in the range of 2–6%.

Full-year free cash flow is predicted to lie within the range of $85–95 million.

Stocks to Consider

Better-ranked stocks from the same space are ACCO Brands Corporation (ACCO - Free Report) , Applied Industrial Technologies, Inc. (AIT - Free Report) and Alarm.Com Holdings, Inc. (ALRM - Free Report) .

ACCO Brands Corporation posted an average positive earnings surprise of 23.93%, over the four trailing quarters. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Industrial Technologies currently carries a Zacks Rank #2 (Buy). It posted an average positive earnings surprise of 4.93%, over the last four quarters.

Alarm.Com Holdings also carries a Zacks Rank #2. The company delivered an average positive earnings surprise of 165.56%, over the trailing four quarters.

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