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Actuant 3Q Earnings Miss Estimates

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Actuant Corporation (ATU - Free Report) reported earnings per share from continuing operations of 62 cents in the third quarter of fiscal 2013 (ended May 31, 2013), missing the Zacks Consensus Estimate of 63 cents by a penny. However, reported earnings beat the year-ago earnings of 51 cents per share by 21.6%.

Quarterly revenues of $344.2 million were flat compared with the Zacks Consensus Estimate of $344.0 million. Core sales decreased 2.0%, while acquisitions contributed 3.0%.

Cost & Margins: Actuant’s gross profit margin decreased 60 basis points year over year to 39.8% for the quarter. Selling, general and administrative expenses were almost flat year over year at $74.3 million in the quarter. Operating margin declined from 17.1% in the year-ago quarter to 16.6% in the quarter, primarily due to weak economic conditions.

Segment Performance: The Industrial segment posted a 1% year-over-year increase in revenues to $111.3 million. Core sales increased 2.0% backed by successful implementation of strategies. However, revenues in Europe and Asia Pacific declined. The segment’s operating profit margin was 29.1%, increasing 120 basis points year over year.

Energy segment’s revenues increased 3% year over year to $99.2 million. The increase can be attributed to a 5% core sales increase, offset by 2% decline due to currency translation. Maintenance spending in oil & gas and revenue from cable and rope activities were instrumental in driving growth. The segment’s operating profit margin was 19.9%, increasing 70 basis points year over year.

The Engineered Solution segment’s revenue decreased 2% to $133.7 million. Acquisitions contributed 8% to the growth, which was offset by a 10% decline in core sales. Results reflected lower OEM production levels for heavy-duty trucks. The segment’s operating profit margin was 9.5%, decreasing 400 basis points year over year.

Balance Sheet/Cash Flow: Exiting fiscal third quarter 2013, Actuant’s cash and cash equivalents were approximately $161.4 million, a considerable increase from the $90.8 million in the previous quarter. Total long-term debt stood at $382.5 million, declining from $385.0 million reported in the prior quarter.

Cash flow from operations in the quarter was $75.9 million compared with $77.3 million in the year-ago quarter. Total capital spending was roughly $7.2 million against $7.0 million spent in the quarter ending May 2012.

Moreover, during Jun 2013, Actuant announced its plan to divest the Electrical segment in order to focus on the more profitable businesses. The segment has been classified as discontinued operations in the reported quarter.

Outlook: Actuant expects its growth trajectory to continue in the fiscal fourth quarter as well, although at a modest rate. Fiscal 2013 total revenue is expected to be in the range of $1.275 billion to $1.285 billion. For fiscal 2013, earnings per share are expected to be in the range of $1.85 to $1.90, with free cash flow in the range of $190-$200 million.

For fiscal 2014, core sales are expected to grow by 3-5% over fiscal 2013. Revenues are expected to be in the range of $1.315 billion to $1.340 billion, with earnings per share in the range of $1.95-$2.05.

Actuant currently carries a Zacks Rank #3 (Hold). Other stocks worth a watch in the machinery industry are Lincoln Electric Holdings Inc. (LECO - Free Report) , AGCO Corporation (AGCO - Free Report) and Alamo Group, Inc. (ALG - Free Report) , each carrying a Zacks Rank #2 (Buy).

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