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Enerpac Gains From Solid Product Portfoilo Amid Pandemic Woes

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On Sep 8, we issued an updated research report on Enerpac Tool Group Corp. (EPAC - Free Report) .

In the past three months, this Zacks Rank #3 (Hold) stock has returned 7.8% against the industry’s decline of 7.4%.

Present Scenario

Enerpac has been benefiting from its strong product portfolio, focus on growth initiatives and exit from non-profitable businesses. Notably, new product sales contributed more than 10% to its sales in the first three quarters of fiscal 2020. In the quarters ahead, the company’s initiatives to improve commercial effectiveness through digital marketing and e-commerce programs are likely to further prove beneficial.

Also, Enerpac has been gaining from its restructuring measures that include actions related to lowering of operational costs, improving operational efficiency and consolidating facilities. Moreover, its buyout of HTL Group (acquired in January 2020) has been aiding its rental offerings throughout the world. In third quarter of fiscal 2020 (ended May 31, 2020), the deal contributed $2 million to the company’s sales.

In addition, it remains committed to rewarding shareholders through dividend payments and share buybacks. In first three quarters of fiscal 2020, the company used $2.4 million for paying out dividends, and repurchasing shares worth $27.5 million.

However, Enerpac remains concerned about the global uncertainties related to the coronavirus outbreak. Notably, it kept its projections for fiscal 2020 (ended Aug 31, 2020, results are awaited) suspended.

Moreover, its high-debt profile poses a concern. Its long-term debt was $286.5 million at the end of the fiscal third quarter, while its cash and cash equivalents were just $163.6 million. The stock looks more leveraged than the industry, with long-term debt/capital ratio of 0.46 and 0.32, respectively. Further increase in debt levels can raise the company’s financial obligations.

Stocks to Consider

Some better-ranked stocks from the Zacks Industrial Products sector are ABB Ltd (ABB - Free Report) , Enersys (ENS - Free Report) and Regal Beloit Corporation (RBC - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ABB delivered a positive earnings surprise of 100.00%, in the last reported quarter.

Enersys delivered a positive earnings surprise of 5.20%, on average, in the trailing four quarters.

Regal Beloit delivered a positive earnings surprise of 18.91%, on average, in the trailing four quarters.

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