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Enerpac Tool (EPAC) Q1 Earnings Miss Estimates, Increase Y/Y

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Enerpac Tool Group Corp. (EPAC - Free Report) delivered weaker-than-expected results for first-quarter fiscal 2022 (ended Nov 30, 2021). Earnings in the quarter lagged estimates by 23.8% while revenues missed the same by 6.8%.

The company’s adjusted earnings per share in the reported quarter were 16 cents, lagging the Zacks Consensus Estimate of 21 cents. However, the bottom line increased 77.8% from earnings of 9 cents per share in the year-ago quarter on the back of revenue growth. The prevalent supply-chain, inflation and logistics woes were spoilsports.

Revenue Details

In the reported quarter, the company’s revenues were $130.9 million, reflecting 9.6% increase from the year-ago quarter’s figure. The top line gained from healthy performance at Industrial Tools & Services and Other segments.

The top line lagged the Zacks Consensus Estimate of $140.5 million.

Organic sales in the quarter under review were up 9% year over year, driven by 14% growth in product sales. Service revenues in the quarter played spoilsport, decreasing 3% year over year. Movements in foreign currency had minimal impacts on the quarter’s revenues.

The segmental information is briefly discussed below.

Industrial Tools & Services (92.7% of first-quarter fiscal 2022 net sales): Revenues in the reported quarter totaled $121.3 million, reflecting an 8.1% increase from the year-ago figure. The year-over-year growth in revenues was driven by market recovery worldwide and the impacts of pricing actions taken by the company.

Other (7.3% of net sales in first-quarter fiscal 2022): Revenues in the segment totaled $9.6 million, up 32.2% from the year-ago quarter.

Margin Profile

In the reported quarter, Enerpac Tool’s cost of sales grew 11.1% year over year to $71.3 million. It represented 54.5% of the reported quarter’s net sales compared with 53.7% in the year-ago quarter. The gross profit increased 7.9% year over year to $59.6 million. The gross margin decreased 70 basis points year over year to 45.6%.

The gross profit results in the quarter suffered from impacts of inflationary, supply-chain and logistics woes.

Selling, administrative and engineering expenses increased 10.9% year over year to $48.5 million. Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) were $17.6 million, up 20.5% year over year. The adjusted EBITDA margin was 13.4% compared with 12.2% in the year-ago quarter.

Adjusted operating income was $12.9 million in the reported quarter, reflecting an improvement from $9.4 million generated in the year-ago quarter. The adjusted operating margin in the quarter under review was 9.9% compared with 7.9% in the year-ago quarter. Net financing costs declined 44% year over year to $1 million.

Balance Sheet and Cash Flow

Exiting first-quarter fiscal 2022, Enerpac Tool’s cash and cash equivalents totaled $126.5 million, down 9.9% from $140.4 million at the end of the last-reported quarter. Long-term debt was stable sequentially at $175 million.

In the reported quarter, the company repaid $50 million of revolving credit facility, and its borrowing from the same source was $5 million. Its net debt to adjusted EBITDA was 0.7X at the end of the fiscal first quarter versus 0.6X at fourth-quarter end.

Enerpac Tool used net cash of $4.7 million for its operating activities in the first quarter of fiscal 2022. It generated net operating cash of $8.7 million in the year-ago quarter. Capital spending totaled $3.3 million, up 72.9% year over year. Free cash outflow in the reported quarter was $7.9 million compared with cash inflow of $6.8 million in the year-ago quarter.

In the quarter, the company paid out cash dividends of $2.4 million.

Outlook

Enerpac Tool anticipates healthy demand and focus on growth to be beneficial in fiscal 2022 (ending August 2022). However, headwinds related to cost inflation, supply-chain woes and logistics issues continue to be concerning.

For fiscal 2022, Enerpac Tool maintained its sales projection of $590-$610 million. It represents an increase from the year-ago tally of $528.7 million. Incremental adjusted EBITDA is expected to be 35-45% (maintained).

Enerpac Tool Group Corp. Price, Consensus and EPS Surprise

Enerpac Tool Group Corp. Price, Consensus and EPS Surprise

Enerpac Tool Group Corp. price-consensus-eps-surprise-chart | Enerpac Tool Group Corp. Quote

Zacks Rank & Stocks to Consider

With market capitalization of $1.3 billion, Enerpac Tool currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Zacks Industrial Products sector are discussed below.

Helios Technologies, Inc. (HLIO - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings beat in the last-reported quarter was 30.49%. The average earnings beat in the last four quarters was 37.54%, on average.

In the past 60 days, Helios’ earnings estimates have increased 7.9% for 2021 and 9.6% for 2022. HLIO’s shares have gained 9.6% in the past three months.

Ingersoll Rand Inc. (IR - Free Report) reported better-than-expected results in the last reported quarter, with earnings surpassing estimates by 23.91%. Its earnings surprise in the last four quarters was 19.78%, on average. The company presently carries a Zacks Rank #2 (Buy).

Ingersoll’s earnings estimates increased 11.7% for 2021 and 7.9% for 2022 in the past 60 days. IR’s shares have increased 9.4% in the past three months.

Applied Industrial Technologies, Inc.’s (AIT - Free Report) results in the last-reported quarter were impressive, with earnings surpassing estimates by 14.29%. Its last four-quarter average earnings surprise was 26.71%. The company presently carries a Zacks Rank #2.

Applied Industrial’s earnings estimates have increased 1.9% for fiscal 2022 (ending June 2022) and 2.2% for fiscal 2023 (ending June 2023) in the past 60 days. AIT’s shares have gained 13.8% in the past three months.