Altra Industrial Motion Corp. reported weaker-than-expected results for the third quarter of 2021. Its earnings lagged the Zacks Consensus Estimate by 2.44%. This came in after six quarters of earnings beats. Also, sales in the quarter lagged estimates by 0.31%.
The company’s non-GAAP earnings were 80 cents per share in the reported quarter, lagging the Zacks Consensus Estimate of 82 cents. The bottom line decreased 8% from the year-ago quarter’s 87 cents.
Revenue Details
In the reported quarter, Altra Industrial’s revenues were $469.3 million, reflecting an increase of 7.2% from the year-ago number. Foreign currency translation had a positive impact of 1.4%. Organic sales in the reported quarter expanded 5.8%, driven by healthy end-market businesses, including material handling, factory automation, specialty machinery, turf & garden, agriculture, and construction.
Also, the company’s revenues lagged the Zacks Consensus Estimate of $471 million.
On a geographical basis, the company’s organic sales expanded 12.4% year over year in North America and increased 11.5% in Europe. However, sales in the Asia Pacific/Rest of World decreased 15.3%.
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 $232.5 million, increasing 17.6% year over year. Organic sales in the quarter expanded 16% year over year.
Automation & Specialty’s sales were $237.8 million in the third quarter, down 1.2% from the year-ago reported quarter. Organic sales decreased 2.6% from the year-ago quarter.
Margin Profile
In the reported quarter, Altra Industrial’s cost of sales increased 9.4% year over year to $299.4 million. Notably, the cost of sales represented 63.8% of net sales. Non-GAAP gross profit was $169.9 million, up 3.5% year over year. The gross margin (non-GAAP) decreased 130 basis points (bps) year over year to 36.2%. The company suffered from the adverse impacts of inflation, labor shortages, and supply-chain headwinds.
Selling, general and administrative expenses (non-GAAP) increased 11.4% year over year to $91.9 million and represented 19.6% of net sales. Research and development expenses (non-GAAP) were $15.5 million versus $13.8 million in the year-ago quarter.
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $97 million, the margin being 20.7%. The non-GAAP operating income in the reported quarter decreased 6% year over year to $80.6 million, with the non-GAAP operating margin decreasing 240 bps to 17.2%.
Net interest expenses totaled $16.1 million in the reported quarter, reflecting a decrease of 10.6% from the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the third quarter of 2021, Altra Industrial’s cash and cash equivalents were $256.8 million, decreasing 7.6% from $277.8 million recorded in the last reported quarter. Long-term debt was $1,289.7 million, reflecting a 5.1% decline from $1,359.3 million in the last reported quarter.
In the first three quarters of 2021, the company repaid $120 million of borrowings under its term-loan facility.
In the first three quarters of 2021, it generated net cash of $170.1 million from operating activities, up 5.1% from the year-ago period. Capital invested for purchasing property, plant and equipment totaled $25.6 million, increasing 5.3% year over year. Non-GAAP free cash flow (adjusted) was $144.5 million versus $172.2 million in the year-ago period.
Dividends
In the first three quarters of 2021, the company paid out dividends amounting to $13.1 million, down from $24.9 million distributed in the prior-year period.
A couple of days before the earnings release, it announced that its board of directors approved the payment of a quarterly dividend of 8 cents per share. The dividend payment for the fourth quarter will be made on Jan 4, 2022, to shareholders of record as of Dec 17, 2021.
Outlook
Altra Industrial believes that a healthy industrial demand will be advantageous in the fourth quarter of 2021. However, supply-chain issues along with inflation, logistics, and labor problems are worrisome.
For 2021, the company decreased its financial projections. Sales are now projected to be $1,880-$1,900 million, higher than $1,890-$1,920 million mentioned earlier.
Non-GAAP earnings are expected to be $3.25-$3.35, down from the previously stated $3.30-$3.46. Also, non-GAAP adjusted EBITDA is likely to be $390-$400 million, down from $395-$405 million stated earlier. The tax rate is anticipated to be 20-22%.
Cash flow from operations is expected to be $240-$270 million in 2021 (versus $260-$290 million stated earlier), while capital expenditure is likely to be $40-$45 million, down from $50-$55 million mentioned previously. Free cash flow (non-GAAP) is predicted to be $200-$225 million, down from $210-$235 million mentioned earlier.
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Altra Industrial (AIMC) Lags on Q3 Earnings, Lowers '21 View
Altra Industrial Motion Corp. reported weaker-than-expected results for the third quarter of 2021. Its earnings lagged the Zacks Consensus Estimate by 2.44%. This came in after six quarters of earnings beats. Also, sales in the quarter lagged estimates by 0.31%.
The company’s non-GAAP earnings were 80 cents per share in the reported quarter, lagging the Zacks Consensus Estimate of 82 cents. The bottom line decreased 8% from the year-ago quarter’s 87 cents.
Revenue Details
In the reported quarter, Altra Industrial’s revenues were $469.3 million, reflecting an increase of 7.2% from the year-ago number. Foreign currency translation had a positive impact of 1.4%. Organic sales in the reported quarter expanded 5.8%, driven by healthy end-market businesses, including material handling, factory automation, specialty machinery, turf & garden, agriculture, and construction.
Also, the company’s revenues lagged the Zacks Consensus Estimate of $471 million.
On a geographical basis, the company’s organic sales expanded 12.4% year over year in North America and increased 11.5% in Europe. However, sales in the Asia Pacific/Rest of World decreased 15.3%.
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 $232.5 million, increasing 17.6% year over year. Organic sales in the quarter expanded 16% year over year.
Automation & Specialty’s sales were $237.8 million in the third quarter, down 1.2% from the year-ago reported quarter. Organic sales decreased 2.6% from the year-ago quarter.
Margin Profile
In the reported quarter, Altra Industrial’s cost of sales increased 9.4% year over year to $299.4 million. Notably, the cost of sales represented 63.8% of net sales. Non-GAAP gross profit was $169.9 million, up 3.5% year over year. The gross margin (non-GAAP) decreased 130 basis points (bps) year over year to 36.2%. The company suffered from the adverse impacts of inflation, labor shortages, and supply-chain headwinds.
Selling, general and administrative expenses (non-GAAP) increased 11.4% year over year to $91.9 million and represented 19.6% of net sales. Research and development expenses (non-GAAP) were $15.5 million versus $13.8 million in the year-ago quarter.
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $97 million, the margin being 20.7%. The non-GAAP operating income in the reported quarter decreased 6% year over year to $80.6 million, with the non-GAAP operating margin decreasing 240 bps to 17.2%.
Net interest expenses totaled $16.1 million in the reported quarter, reflecting a decrease of 10.6% from the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the third quarter of 2021, Altra Industrial’s cash and cash equivalents were $256.8 million, decreasing 7.6% from $277.8 million recorded in the last reported quarter. Long-term debt was $1,289.7 million, reflecting a 5.1% decline from $1,359.3 million in the last reported quarter.
In the first three quarters of 2021, the company repaid $120 million of borrowings under its term-loan facility.
In the first three quarters of 2021, it generated net cash of $170.1 million from operating activities, up 5.1% from the year-ago period. Capital invested for purchasing property, plant and equipment totaled $25.6 million, increasing 5.3% year over year. Non-GAAP free cash flow (adjusted) was $144.5 million versus $172.2 million in the year-ago period.
Dividends
In the first three quarters of 2021, the company paid out dividends amounting to $13.1 million, down from $24.9 million distributed in the prior-year period.
A couple of days before the earnings release, it announced that its board of directors approved the payment of a quarterly dividend of 8 cents per share. The dividend payment for the fourth quarter will be made on Jan 4, 2022, to shareholders of record as of Dec 17, 2021.
Outlook
Altra Industrial believes that a healthy industrial demand will be advantageous in the fourth quarter of 2021. However, supply-chain issues along with inflation, logistics, and labor problems are worrisome.
For 2021, the company decreased its financial projections. Sales are now projected to be $1,880-$1,900 million, higher than $1,890-$1,920 million mentioned earlier.
Non-GAAP earnings are expected to be $3.25-$3.35, down from the previously stated $3.30-$3.46. Also, non-GAAP adjusted EBITDA is likely to be $390-$400 million, down from $395-$405 million stated earlier. The tax rate is anticipated to be 20-22%.
Cash flow from operations is expected to be $240-$270 million in 2021 (versus $260-$290 million stated earlier), while capital expenditure is likely to be $40-$45 million, down from $50-$55 million mentioned previously. Free cash flow (non-GAAP) is predicted to be $200-$225 million, down from $210-$235 million mentioned earlier.
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 & Stocks to Consider
With a market capitalization of $3.5 billion, Altra Industrial currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the industry are DXP Enterprises, Inc. (DXPE - Free Report) , Nordson Corporation (NDSN - Free Report) , and Kadant Inc. (KAI - Free Report) . While both DXP Enterprises and Nordson currently sport a Zacks Rank #1 (Strong Buy), Kadant carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for the companies improved for the current year.