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Altra Industrial (AIMC) Tops on Q1 Earnings & Sales, Ups View

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Altra Industrial Motion Corp. (AIMC - Free Report) delivered impressive results for first-quarter 2020. Its earnings surpassed estimates by 13.16%, whereas sales exceeded the same by 3.09%. Notably, the earnings beat is the company’s fifth consecutive quarter of healthy bottom-line results.

Better-than-expected results and increased projections as well as a hike in the quarterly dividend rate are the striking points.

The machinery company’s non-GAAP earnings in the reported quarter were 86 cents per share, surpassing the Zacks Consensus Estimate of 76 cents. Also, the bottom line rose 32.3% from the year-ago quarter figure of 65 cents.

Revenue Details

In the reported quarter, Altra Industrial’s revenues were $472.1 million, reflecting an increase of 8.7% from the year-ago number.

Foreign currency translation had a positive impact of 3.3 percentage points. Organic sales in the reported quarter expanded 5.4%, driven by healthy business in factory automation, transportation, specialty machinery and others.

Also, the company’s revenues surpassed the Zacks Consensus Estimate of $458 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 $221 million, increasing 2% year over year.

Automation & Specialty’s sales were $252.1 million in the first quarter, up 15.3% from the year-ago reported quarter.

Margin Profile

In the reported quarter, Altra Industrial’s cost of sales increased 6.8% year over year to $300.4 million. Notably, cost of sales represented 63.6% of net sales. Non-GAAP gross profit was $171.7 million, up 12.2% year over year. Gross margin (non-GAAP) increased 120 basis points (bps) year over year to 36.4%.

Selling, general and administrative expenses (non-GAAP) increased 4.1% year over year to $71.9 million and represented 15.2% of net sales. Research and development expenses (non-GAAP) were $15.9 million versus $14.8 million in the year-ago quarter.

Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $101.6 million, the margin being 21.5%. Non-GAAP operating income in the reported quarter increased 21.3% year over year to $83.9 million, with non-GAAP operating margin increasing 190 bps to 17.8%.

Net interest expenses totaled $16.9 million in the reported quarter, reflecting a decrease of 2.9% from the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the first quarter of 2021, Altra Industrial’s cash and cash equivalents were $249.4 million, decreasing 2% from $254.4 million recorded in the last reported quarter. Long-term debt was $1,388.3 million, reflecting a 1.5% decline from $1,408.1 million in the last reported quarter.

In the reported quarter, the company repaid $20 million of borrowings under its term-loan facility.

In first-quarter 2021, it generated net cash of $36.2 million from operating activities, up 3.7% from the year-ago period. Capital invested for purchasing property, plant and equipment totaled $9.6 million, increasing 17.1% year over year. Non-GAAP free cash flow was $26.6 million versus $26.7 million in the year-ago quarter.

Dividends

In the first quarter of 2021, the company paid out dividends amounting to $3.9 million, down from $11.3 million distributed in the prior-year quarter.
 
A couple of days before the earnings release, the company announced that its board of directors approved the payment of a quarterly dividend of 8 cents per share. Notably, the quarterly dividend rate, pertaining to the second quarter of 2021, is 33.3% higher than the previous rate of 6 cents paid out by the company for the first quarter of 2021.

The dividend payment for the second quarter will be made on Jul 2, 2021, to shareholders of record as of Jun 18, 2021.

Outlook

Altra Industrial noted that its diversified businesses, initiatives to boost opportunities in end markets, debt-reduction actions and healthy cash generation might be beneficial in the quarters ahead.

For 2021, the company increased its financial projections, backed by healthy orders, improved visibility and strengthening markets. Sales are now projected to be $1,820-$1,850 million, higher than $1,790-$1,830 million mentioned earlier.

Non-GAAP earnings are expected to be $3.09-$3.24, up from the previously stated $2.95-$3.15. Also, non-GAAP adjusted EBITDA is likely to be $380-$390 million, up from $370-$385 million stated earlier.

The tax rate is still anticipated to be 20-22.5% versus 20-23% mentioned previously. Capital spending is expected to be $50-$55 million, up from the earlier stated of $45-$50 million.

Altra Industrial Motion Corp. Price, Consensus and EPS Surprise

 

Altra Industrial Motion Corp. Price, Consensus and EPS Surprise

Altra Industrial Motion Corp. price-consensus-eps-surprise-chart | Altra Industrial Motion Corp. Quote

Zacks Rank & Other Stocks to Consider

With a market capitalization of $4.1 billion, Altra Industrial currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the industry are Applied Industrial Technologies, Inc. (AIT - Free Report) , Dover Corporation (DOV - Free Report) and Graco Inc. (GGG - Free Report) . While Applied Industrial currently sports a Zacks Rank #1 (Strong Buy), both Dover and Graco carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for these companies improved for the current year. Further, earnings surprise for the last reported quarter was 35.64% for Applied Industrial, 23.13% for Dover and 16.00% for Graco.

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