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Actuant Corporation (ATU - Analyst Report) is slated to report its fourth-quarter and fiscal 2012 results on September 27, 2012. The Zacks Consensus Estimate for the quarter is 54 cents per share, representing a growth of 8% from 50 cents in the year-ago quarter. The Zacks Consensus Estimate for fiscal 2012 stands at $2.07, reflecting an expected annual growth of 23% from the year-ago EPS of $1.68.

The Zacks Consensus Estimate for revenue currently stands at $410 million for the fourth quarter and $1.61 billion for fiscal 2012, depicting an annual growth of 2% and 11% respectively.

Third Quarter Synopsis

Actuant reported adjusted EPS of 60 cents in the third quarter of 2012 (ended May 31, 2012), a penny ahead of the Zacks Consensus Estimate and 19% higher than the year-ago quarter’s EPS of 51 cents. Solid results in the U.S. and the Energy segment helped offset some end-market softness in Europe and China. Including debt financing costs, EPS in the quarter stood at 45 cents. Including discontinued operations, EPS in the year ago quarter came in at 49 cents.

Total revenue of $429 million was in line with the Zacks Consensus Estimate but 9% higher than the year-ago revenue of $393 million. Core sales increased 4% and acquisitions contributed 8%. Weaker Euro had a negative impact of 3%.

Looking Ahead

The company, during its third quarter earnings call, had put forward a fourth quarter guidance with sales in the range of $400 million to $410 million and EPS in the band of 50 cents to 55 cents a share. Earlier this month, Actuant announced that it expects to incur an asset impairment charge of $60 million in its fourth quarter 2012, due to poor performance of its Mastervolt business. Excluding the impairment charge, fourth quarter results are expected to be at the upper end of the guidance range. 

For fiscal 2012, the company estimates sales in the range of $1.60–1.61 billion and EPS in the $2.03–2.08 range. Free cash flow is projected to be in the range of $180–185 million.

For fiscal 2013, the company anticipates irregular end-market demand, particularly in Europe and China. Core sales growth is estimated at 3–5% with full-year revenues in the band of $1.665–$1.700 billion. Higher volumes, lower interest expenses and share repurchases are expected to result in EPS, which could be in the range of $2.15–$2.30. Free cash flow is expected to be between $195 and $200 million.

For the fiscal fourth quarter, the Zacks Consensus Estimates for sales of $410 million is at the upper end of the company guidance. The Zacks Consensus Estimate for EPS is at 54 cents, closer to the upper end of the guidance. For fiscal 2012, the Zacks Consensus Estimates for sales is $1.61 billion, at the upper end of the guidance and the same for EPS is at $2.07, a penny below the upper end of the company’s guidance.

Estimate Revision Trend

Agreement

Out of twelve analysts covering the stock, only one and two revised the estimates upwards for the fourth quarter in the last 7 days and in the last 30 days, respectively. For fiscal 2012, out of the twelve analysts covering the stock, only one upward revision was witnessed in the past 7 days as well as past 30 days.

Magnitude

The Zacks Consensus Estimates remained unchanged for both the fourth quarter and fiscal 2012 over the last 90 days.  

Earnings Surprise History

With respect to earnings surprise, Actuant Corporation has topped the Zacks Consensus Estimate in all the previous four quarters. The company delivered an average positive earnings surprise of 10.14%, implying that it has beaten the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Our Take

Actuant’s acquisition pipeline is robust and remains well positioned to invest in growth opportunities and also fund share buybacks based on its strong balance sheet. The company recently acquired Alfta, Sweden based CrossControl AB, a leading provider of advanced electronic solutions for user-machine interaction, vehicle control, and mobile connectivity in critical environments.

CrossControl serves key end markets such as mining, cargo handling, forestry, construction and rail which align with Actuant’s strategic growth themes including infrastructure and natural resources. 

Earlier in March, the company acquired Turotest, a leader in the design and manufacture of instrument panels, gauges and senders serving the Brazilian agriculture and industrial markets. The acquisition adds to the agriculture platform, which the company has identified as a key-growth end market.

This acquisition will enable the company to extend its reach into the growing agriculture, construction and mobile equipment markets in Latin America. However, currency translation and uncertainty in Europe remains headwinds. We currently have a Zacks #2 Rank (short-term Buy recommendation) on the stock.

Headquartered in Menomonee Falls, Wisconsin, Actuant Corporation designs, manufactures and distributes industrial products and systems worldwide. It operates through four segments: Industrial, Energy, Electrical and Engineered Solutions. It competes with Eaton Corporation (ETN - Analyst Report), Kennametal Inc. (KMT - Analyst Report) and Parker Hannifin Corporation (PH - Analyst Report).

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