Sun Hydraulics Corporation reported impressive results for third-quarter 2017, marking the third consecutive quarter of a positive earnings surprise.
The quarter’s non-GAAP adjusted earnings came in at 43 cents per share, surpassing the Zacks Consensus Estimate of 36 cent by 19.4%. Also, the bottom line increased 126% from the year-ago tally of 19 cents.
Organic and Inorganic Gains Drive Revenues
Net sales in the quarter were $88 million, topping the Zacks Consensus Estimate of $80 million by 9.6%. Also, the top line surged 95% year over year on the back of solid organic growth of 27%, benefits from acquired assets of Enovation Controls (completed in December 2016) and favorable impact of foreign currency translation.
On a geographical basis, sales from the Americas increased 143.5% year over year to $52.1 million, representing 59% of net sales. Europe/Middle East/Africa sales comprising roughly 22% of net sales were $19 million, up 35.7% year over year. Sales from Asia Pacific grew 72.4% to $16.9 million. It represented 19% of net sales.
The company reports its quarterly sales under two segmental heads. Details for this quarter are provided below:
Hydraulics’ revenues totaled $56.6 million, increasing 27.6% year over year. It represented 64.4% of net sales. The segment gained from strengthening foothold in new markets as well as investments in field application specialists.
Revenues from Electronics totaled $31.4 million, significantly above $0.8 million generated in the year-ago quarter. It represented 35.6% of net sales. The performance was driven by benefits derived from new products launched, solid demand in the power controls and recreational vehicle markets and gains from sales initiatives.
Margin Profile Improves
Sun Hydraulics’ cost of sales in the quarter increased 74% year over year, partially offsetting 95% growth in the quarter’s net sales. Gross profit grew 134% year over year while gross margin came in at 41.2% versus 34.4% in the year-ago quarter.
Selling, engineering and administrative expenses, as a percentage of revenues were 19.2% compared with 18.1% in the year-ago quarter. Operating income escalated 142% year over year to $17.4 million while margin came in at 19.8% compared with 15.9% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the third quarter, Sun Hydraulics’ cash and cash equivalents were $81.2 million, up from $78.7 million in the preceding quarter.
In the first nine months of 2017, the company generated net cash of $38.4 million from its operating activities, up 22.7% over the year-ago period. Capital spending totaled $8.3 million, increasing 84.4% year over year. During the period, the company paid dividends amounting to $7.8 million.
Outlook
Sun Hydraulics is working diligently to improve its product portfolio and serve its customers better. The company aims to improve its operational execution, product development and market penetration.
The company has increased its revenue guidance for 2017 to $330-$340 million from the earlier projection of $315-$330 million. On a segmental basis, Hydraulics’ revenues are predicted to be $225-$230 million, up from $215-$225 million expected earlier. Electronics’ revenues are anticipated to be within $105-$110 million, increasing from $100-$105 million expected earlier.
Operating margin projection was reaffirmed at 22−24% while capital spending still is projected to be in $20-$25 million range. Effective tax rate will be 32-34%.
Sun Hydraulics Corporation Price and Consensus
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Sun Hydraulics Corporation reported impressive results for third-quarter 2017, marking the third consecutive quarter of a positive earnings surprise.
The quarter’s non-GAAP adjusted earnings came in at 43 cents per share, surpassing the Zacks Consensus Estimate of 36 cent by 19.4%. Also, the bottom line increased 126% from the year-ago tally of 19 cents.
Organic and Inorganic Gains Drive Revenues
Net sales in the quarter were $88 million, topping the Zacks Consensus Estimate of $80 million by 9.6%. Also, the top line surged 95% year over year on the back of solid organic growth of 27%, benefits from acquired assets of Enovation Controls (completed in December 2016) and favorable impact of foreign currency translation.
On a geographical basis, sales from the Americas increased 143.5% year over year to $52.1 million, representing 59% of net sales. Europe/Middle East/Africa sales comprising roughly 22% of net sales were $19 million, up 35.7% year over year. Sales from Asia Pacific grew 72.4% to $16.9 million. It represented 19% of net sales.
The company reports its quarterly sales under two segmental heads. Details for this quarter are provided below:
Hydraulics’ revenues totaled $56.6 million, increasing 27.6% year over year. It represented 64.4% of net sales. The segment gained from strengthening foothold in new markets as well as investments in field application specialists.
Revenues from Electronics totaled $31.4 million, significantly above $0.8 million generated in the year-ago quarter. It represented 35.6% of net sales. The performance was driven by benefits derived from new products launched, solid demand in the power controls and recreational vehicle markets and gains from sales initiatives.
Margin Profile Improves
Sun Hydraulics’ cost of sales in the quarter increased 74% year over year, partially offsetting 95% growth in the quarter’s net sales. Gross profit grew 134% year over year while gross margin came in at 41.2% versus 34.4% in the year-ago quarter.
Selling, engineering and administrative expenses, as a percentage of revenues were 19.2% compared with 18.1% in the year-ago quarter. Operating income escalated 142% year over year to $17.4 million while margin came in at 19.8% compared with 15.9% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the third quarter, Sun Hydraulics’ cash and cash equivalents were $81.2 million, up from $78.7 million in the preceding quarter.
In the first nine months of 2017, the company generated net cash of $38.4 million from its operating activities, up 22.7% over the year-ago period. Capital spending totaled $8.3 million, increasing 84.4% year over year. During the period, the company paid dividends amounting to $7.8 million.
Outlook
Sun Hydraulics is working diligently to improve its product portfolio and serve its customers better. The company aims to improve its operational execution, product development and market penetration.
The company has increased its revenue guidance for 2017 to $330-$340 million from the earlier projection of $315-$330 million. On a segmental basis, Hydraulics’ revenues are predicted to be $225-$230 million, up from $215-$225 million expected earlier. Electronics’ revenues are anticipated to be within $105-$110 million, increasing from $100-$105 million expected earlier.
Operating margin projection was reaffirmed at 22−24% while capital spending still is projected to be in $20-$25 million range. Effective tax rate will be 32-34%.
Sun Hydraulics Corporation Price and Consensus
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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