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ESCO (ESE) to Buy Altanova, To Boost Utilities Solutions

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ESCO Technologies Inc. (ESE - Free Report) yesterday announced that it will acquire Taino, Italy-based I.S.A Altanova Group S.R.L. The financial terms of the transaction have been kept under wraps.

Altanova engages in providing monitoring systems and diagnostic products as well as services for electrical assets. Its products and services are mainly used in the process, power generation, renewable energy, transmission and distribution networks industries. The company’s operations are spread in excess of 100 countries.

Inside the Headlines

As noted, the Altanova acquisition is predicted to boost ESCO’s product offerings and geographical reach, especially in Asia and Europe. It will enable the company to leverage benefits from the growing power infrastructure market around the world. In calendar year 2020, Altanova generated revenues of $30 million.

Upon the receipt of Italian regulatory approvals, ESCO expects the acquisition to be complete in one and a half months. Post the completion, ESCO will integrate Altanova with its Utility Solutions Group (“USG”) segment.

The Utility Solutions Group’s business comprises of the operations of Doble Engineering Company and Morgan Schaffer Ltd. as well as NRG Systems, Inc. While Doble engages in making diagnostic testing solutions, NRG manufactures decision support tools to be used mainly in the renewable energy market. It generated revenues of $39.6 million in second-quarter fiscal 2021 (ended March 2021). This accounted for 23.7% of the company’s second-quarter total revenues.

Acquiring businesses is an effective way for the company to gain access to new markets, expand its product line and enhance its customer base. Notably, the company invested $6.7 million in making acquisitions (net of cash acquired) in the first half of fiscal 2021 (ended March 2021).

Zacks Rank, Estimate Trend and Price Performance

With a $2.5-billion market capitalization, ESCO currently carries a Zacks Rank #3 (Hold). The company is well-positioned to benefit from its solid product offerings, exposure in diversified end markets, healthy liquidity position, buyouts and effective cost actions. However, the challenges related to the pandemic are still concerning for utility and commercial aerospace businesses.

In the past three months, the company’s shares have decreased 10.9% as compared with the industry’s growth of 2.7%.


Meanwhile, the Zacks Consensus Estimate for its earnings is pegged at $2.90 for fiscal 2021 (ending September 2021) and $3.46 for fiscal 2022 (ending September 2022). The estimates reflect year-over-year growth of 5.1% for fiscal 2021 and 19.3% for fiscal 2022.

Some other companies from the same industry engaging in buyout activities in the year-to-date period are Regal Beloit Corporation (RBC - Free Report) , Eaton Corporation plc (ETN - Free Report) and AZZ Inc. (AZZ - Free Report) . Notably, the companies presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 30 days, earnings estimates for these companies have improved for the current year. Also, its earnings surprise for the last reported quarter was 17.86% for Regal Beloit, 15.20% for Eaton and 5.08% for AZZ.

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