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Here's Why You Must Hold on to Actuant (ATU) Stock Now
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We issued an updated research report on Actuant Corporation on Aug 21.
This machinery company currently carries a Zacks Rank #3 (Hold). Its market capitalization is approximately $1.8 billion.
Let’s delve deeper and discuss the company’s potential growth drivers and possible headwinds.
Factors Favoring Actuant
Financial & Share Price Performances: Actuant’s financial performance was impressive in the third quarter of fiscal 2018 (ended May 31, 2018), with earnings and sales surpassing estimates by 8.3% and 3.7%, respectively.
The company believes that anti-inflationary actions, product launches and higher maintenance activities in the energy end market will be a boon in fiscal 2018 (ending August 2018). Sales in the year are projected to be $1.17-$1.18 billion, higher than $1.14-$1.16 billion expected earlier. Earnings are now predicted to be $1.03-$1.08 versus $1.00-$1.10 expected earlier. The bottom-line revision has raised the mid-point from $1.05 to $1.06.
We believe that solid financial results and outlook have been instrumental for the company’s stock price rally of 16.9% in the past three months. This return has comfortably outperformed 1.1% decline recorded by the industry.
The Zack Consensus Estimate for the company’s earnings is currently pegged at $1.06 for fiscal 2018 and $1.29 for fiscal 2019 (ending August 2019), reflecting year-over-year growth of 27.7% and 21.3%, respectively. Earnings estimates for fourth-quarter fiscal 2018 are 35 cents, representing growth of 84.2% over the year-ago quarter.
Strengthening Portfolio Through Inorganic Activities: Over time, acquired assets have played an important role in expanding Actuant’s business. For instance, Mirage Machines (acquired in second-quarter fiscal 2018) has strengthened the company’s Energy segment. Moreover, the company acquired Equalizer in the third quarter of fiscal 2018. This asset, added to the Industrial segment, is likely to add vigor to the company’s engineering talent and expand channels. Apart from buyouts, divestments have been beneficial for the company over time. In this regard, the divestment of Viking business in second-quarter fiscal 2018 is worth mentioning. This move will limit the company’s exposure to upstream the oil & gas market (offshore).
Initiatives: Innovations, diligent restructuring initiatives and portfolio-management moves are predicted to benefit Actuant in the years ahead. Expansion of the Enerpac products, including the launch of chain cutters and new line of Bottle Jacks in the fiscal third quarter, is expected to boost the company’s near-term revenues. Further, the company aims at lowering its costs through headcount reductions, operational improvements and facility consolidations. Its move toward a two-segment structure will help in building a sound industrial tool as well as component and systems businesses.
Factors Working Against Actuant
Poor Valuation: Actuant is currently overvalued compared with the industry. The stock’s Pre-to-Earnings (P/E) multiple is 32.3, way higher than the industry’s multiple of 18.3. Moreover, the stock is currently trading higher than the median multiple of 31.2. This makes us cautious on the stock.
Engineered Solutions Segment: Weakness in Engineered Solutions segment is a concerning factor for Actuant. The segment’s core sales growth came in at 7% in the third quarter of fiscal 2018, below 10% recorded in the last-reported quarter and 8% in the year-ago quarter. Further, the segment’s core sales are predicted to be flat in the fiscal fourth quarter. Furthermore, the company predicts sales of $290-$300 million in the fiscal fourth quarter, below $317 million generated in the third quarter of fiscal 2018. Lower maintenance activity in the Middle East energy market, unfavorable movements of foreign currencies, fall in China-based truck production and other factors are primarily behind the poor sales projection.
Adversities Arising From Escalating Costs: Actuant is dealing with the adverse impact of rising cost of sales. In third-quarter fiscal 2018, the company’s cost of sales jumped 4.1% while an increase of 8.2% was recorded in the second quarter. Though some anti-inflationary actions are being undertaken by the company, costs associated with ongoing heavy lifting projects, continued inflation and investment spending remain a concern.
In the past 60 days, earnings estimates for each of these stocks improved for the current year and the next year. The average positive earnings surprise for the last four quarters was 4.01% for Altra Industrial Motion, 29.36% for Chart Industries and 6.88% for Barnes Group.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Here's Why You Must Hold on to Actuant (ATU) Stock Now
We issued an updated research report on Actuant Corporation on Aug 21.
This machinery company currently carries a Zacks Rank #3 (Hold). Its market capitalization is approximately $1.8 billion.
Let’s delve deeper and discuss the company’s potential growth drivers and possible headwinds.
Factors Favoring Actuant
Financial & Share Price Performances: Actuant’s financial performance was impressive in the third quarter of fiscal 2018 (ended May 31, 2018), with earnings and sales surpassing estimates by 8.3% and 3.7%, respectively.
The company believes that anti-inflationary actions, product launches and higher maintenance activities in the energy end market will be a boon in fiscal 2018 (ending August 2018). Sales in the year are projected to be $1.17-$1.18 billion, higher than $1.14-$1.16 billion expected earlier. Earnings are now predicted to be $1.03-$1.08 versus $1.00-$1.10 expected earlier. The bottom-line revision has raised the mid-point from $1.05 to $1.06.
We believe that solid financial results and outlook have been instrumental for the company’s stock price rally of 16.9% in the past three months. This return has comfortably outperformed 1.1% decline recorded by the industry.
The Zack Consensus Estimate for the company’s earnings is currently pegged at $1.06 for fiscal 2018 and $1.29 for fiscal 2019 (ending August 2019), reflecting year-over-year growth of 27.7% and 21.3%, respectively. Earnings estimates for fourth-quarter fiscal 2018 are 35 cents, representing growth of 84.2% over the year-ago quarter.
Strengthening Portfolio Through Inorganic Activities: Over time, acquired assets have played an important role in expanding Actuant’s business. For instance, Mirage Machines (acquired in second-quarter fiscal 2018) has strengthened the company’s Energy segment. Moreover, the company acquired Equalizer in the third quarter of fiscal 2018. This asset, added to the Industrial segment, is likely to add vigor to the company’s engineering talent and expand channels. Apart from buyouts, divestments have been beneficial for the company over time. In this regard, the divestment of Viking business in second-quarter fiscal 2018 is worth mentioning. This move will limit the company’s exposure to upstream the oil & gas market (offshore).
Initiatives: Innovations, diligent restructuring initiatives and portfolio-management moves are predicted to benefit Actuant in the years ahead. Expansion of the Enerpac products, including the launch of chain cutters and new line of Bottle Jacks in the fiscal third quarter, is expected to boost the company’s near-term revenues. Further, the company aims at lowering its costs through headcount reductions, operational improvements and facility consolidations. Its move toward a two-segment structure will help in building a sound industrial tool as well as component and systems businesses.
Factors Working Against Actuant
Poor Valuation: Actuant is currently overvalued compared with the industry. The stock’s Pre-to-Earnings (P/E) multiple is 32.3, way higher than the industry’s multiple of 18.3. Moreover, the stock is currently trading higher than the median multiple of 31.2. This makes us cautious on the stock.
Engineered Solutions Segment: Weakness in Engineered Solutions segment is a concerning factor for Actuant. The segment’s core sales growth came in at 7% in the third quarter of fiscal 2018, below 10% recorded in the last-reported quarter and 8% in the year-ago quarter. Further, the segment’s core sales are predicted to be flat in the fiscal fourth quarter. Furthermore, the company predicts sales of $290-$300 million in the fiscal fourth quarter, below $317 million generated in the third quarter of fiscal 2018. Lower maintenance activity in the Middle East energy market, unfavorable movements of foreign currencies, fall in China-based truck production and other factors are primarily behind the poor sales projection.
Adversities Arising From Escalating Costs: Actuant is dealing with the adverse impact of rising cost of sales. In third-quarter fiscal 2018, the company’s cost of sales jumped 4.1% while an increase of 8.2% was recorded in the second quarter. Though some anti-inflationary actions are being undertaken by the company, costs associated with ongoing heavy lifting projects, continued inflation and investment spending remain a concern.
Stocks to Consider
Some better-ranked stocks in the Zacks Industrial Products sector are Altra Industrial Motion Corp. , Chart Industries, Inc. (GTLS - Free Report) and Barnes Group Inc. (B - Free Report) . While Altra Industrial Motion sports a Zacks Rank #1 (Strong Buy), both Chart Industries and Barnes Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for each of these stocks improved for the current year and the next year. The average positive earnings surprise for the last four quarters was 4.01% for Altra Industrial Motion, 29.36% for Chart Industries and 6.88% for Barnes Group.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>