It has been about a month since the last earnings report for Altra Industrial Motion . Shares have added about 11.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Altra due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Altra Industrial Beats on Q1 Earnings, Lowers View
Altra Industrial reported better-than-expected results for first-quarter 2020. Its earnings surpassed estimates by 47.7% and sales topped the same by 5.5%.
The company noted that the coronavirus outbreak modestly impacted its first-quarter results.
The machinery company’s non-GAAP earnings in the reported quarter were 65 cents per share, surpassing the Zacks Consensus Estimate of 44 cents. However, the bottom line decreased 18.8% from the year-ago quarter figure of 80 cents.
Revenue Details
In the reported quarter, Altra Industrial’s revenues decreased 10.1% year over year to $434.2 million.
Forex woes had an adverse impact of 1.45% on the quarter’s sales. Also, organic sales declined 8.6% year over year due to weakness in several end markets — including transportation, distribution, mining, metals, agriculture, turf & garden, medical equipment, and oil & gas. Notably, business in renewable energy, factory automation & specialty machinery, and aerospace & defense markets improved in the quarter.
However, the company’s revenues surpassed the Zacks Consensus Estimate of $411.7 million.
Altra Industrial reports revenues under two heads — Automation & Specialty, and Power Transmission Technologies. A brief snapshot of the segmental sales is provided below:
Revenues generated from Power Transmission Technologies amounted to $216.7 million, declining 7.7% year over year.
Automation & Specialty’s sales were $218.6 million in the first quarter, down 12.2% from the last reported quarter.
Margin Profile
In the reported quarter, Altra Industrial’s cost of sales decreased 8.7% year over year to $281.2 million. Notably, cost of sales represented 64.8% of net sales versus 63.8% in the year-ago quarter. Non-GAAP gross profit was $153 million, down 12.5% year over year. Also, gross margin decreased 80 basis points (bps) to 35.2%.
Non-GAAP selling, general and administrative expenses decreased 3.4% year over year to $69.1 million and represented 15.9% of net sales. Research and development expenses were $14.8 million versus $15.3 million in the year-ago quarter.
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $85.9 million, the margin being 19.8%. However, non-GAAP operating income in the reported quarter declined 21.6% year over year to $69.1 million, with non-GAAP operating margin decreasing 230 bps to 15.9%.
Net interest expenses totaled $17.4 million in the reported quarter versus $19.8 million in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the first quarter, Altra Industrial’s cash and cash equivalents were $326.9 million, increasing 95.4% from $167.3 million recorded in the last reported quarter. Long-term debt was $1,658.5 million, reflecting a 6.1% increase from $1,563.8 million in the last reported quarter.
During the quarter, the company repaid $6 million of borrowing under its term-loan facility, while additional borrowing under its revolving facility totaled $100 million.
In the first quarter of 2020, it generated net cash of $34.9 million from operating activities, down 91.3% from the year-ago quarter. Capital invested for purchasing property, plant and equipment totaled $8.2 million, decreasing 41.4% year over year. Free cash flow was $26.7 million versus $25.3 million in the year-ago period.
In the quarter, the company paid out dividends amounting to $11.3 million, slightly above $11.1 million distributed in the prior-year quarter.
Outlook
Altra Industrial noted that cash generation, workers’ safety, providing services to customers, solid liquidity position and a healthy supply chain are its priorities at present. Despite this, it predicts the pandemic to affect its performance in 2020, as is visible from the revised projections for the year.
It expects sales of $1,540-$1,620 million versus the previously mentioned $1,720-$1,770 million for the year.
Non-GAAP earnings are expected to be $1.67-$2.03, down from $2.40-$2.60 per share stated earlier. Also, non-GAAP adjusted EBITDA is likely to be $281-$317 million (down from the earlier mentioned $340-$360 million). The tax rate is anticipated to be 21-23% (versus the previously stated 22-24%). Capital spending is expected to be down to $40-$45 million from $45-$50 million stated previously.
How Have Estimates Been Moving Since Then?
Estimates revision followed a downward path over the past two months. The consensus estimate has shifted 177.27% due to these changes.
VGM Scores
Currently, Altra has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Altra has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Altra (AIMC) Up 11.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Altra Industrial Motion . Shares have added about 11.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Altra due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Altra Industrial Beats on Q1 Earnings, Lowers View
Altra Industrial reported better-than-expected results for first-quarter 2020. Its earnings surpassed estimates by 47.7% and sales topped the same by 5.5%.
The company noted that the coronavirus outbreak modestly impacted its first-quarter results.
The machinery company’s non-GAAP earnings in the reported quarter were 65 cents per share, surpassing the Zacks Consensus Estimate of 44 cents. However, the bottom line decreased 18.8% from the year-ago quarter figure of 80 cents.
Revenue Details
In the reported quarter, Altra Industrial’s revenues decreased 10.1% year over year to $434.2 million.
Forex woes had an adverse impact of 1.45% on the quarter’s sales. Also, organic sales declined 8.6% year over year due to weakness in several end markets — including transportation, distribution, mining, metals, agriculture, turf & garden, medical equipment, and oil & gas. Notably, business in renewable energy, factory automation & specialty machinery, and aerospace & defense markets improved in the quarter.
However, the company’s revenues surpassed the Zacks Consensus Estimate of $411.7 million.
Altra Industrial reports revenues under two heads — Automation & Specialty, and Power Transmission Technologies. A brief snapshot of the segmental sales is provided below:
Revenues generated from Power Transmission Technologies amounted to $216.7 million, declining 7.7% year over year.
Automation & Specialty’s sales were $218.6 million in the first quarter, down 12.2% from the last reported quarter.
Margin Profile
In the reported quarter, Altra Industrial’s cost of sales decreased 8.7% year over year to $281.2 million. Notably, cost of sales represented 64.8% of net sales versus 63.8% in the year-ago quarter. Non-GAAP gross profit was $153 million, down 12.5% year over year. Also, gross margin decreased 80 basis points (bps) to 35.2%.
Non-GAAP selling, general and administrative expenses decreased 3.4% year over year to $69.1 million and represented 15.9% of net sales. Research and development expenses were $14.8 million versus $15.3 million in the year-ago quarter.
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $85.9 million, the margin being 19.8%. However, non-GAAP operating income in the reported quarter declined 21.6% year over year to $69.1 million, with non-GAAP operating margin decreasing 230 bps to 15.9%.
Net interest expenses totaled $17.4 million in the reported quarter versus $19.8 million in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the first quarter, Altra Industrial’s cash and cash equivalents were $326.9 million, increasing 95.4% from $167.3 million recorded in the last reported quarter. Long-term debt was $1,658.5 million, reflecting a 6.1% increase from $1,563.8 million in the last reported quarter.
During the quarter, the company repaid $6 million of borrowing under its term-loan facility, while additional borrowing under its revolving facility totaled $100 million.
In the first quarter of 2020, it generated net cash of $34.9 million from operating activities, down 91.3% from the year-ago quarter. Capital invested for purchasing property, plant and equipment totaled $8.2 million, decreasing 41.4% year over year. Free cash flow was $26.7 million versus $25.3 million in the year-ago period.
In the quarter, the company paid out dividends amounting to $11.3 million, slightly above $11.1 million distributed in the prior-year quarter.
Outlook
Altra Industrial noted that cash generation, workers’ safety, providing services to customers, solid liquidity position and a healthy supply chain are its priorities at present. Despite this, it predicts the pandemic to affect its performance in 2020, as is visible from the revised projections for the year.
It expects sales of $1,540-$1,620 million versus the previously mentioned $1,720-$1,770 million for the year.
Non-GAAP earnings are expected to be $1.67-$2.03, down from $2.40-$2.60 per share stated earlier. Also, non-GAAP adjusted EBITDA is likely to be $281-$317 million (down from the earlier mentioned $340-$360 million). The tax rate is anticipated to be 21-23% (versus the previously stated 22-24%). Capital spending is expected to be down to $40-$45 million from $45-$50 million stated previously.
How Have Estimates Been Moving Since Then?
Estimates revision followed a downward path over the past two months. The consensus estimate has shifted 177.27% due to these changes.
VGM Scores
Currently, Altra has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Altra has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.