A month has gone by since the last earnings report for Altra Industrial Motion . Shares have lost about 11.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Altra due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Altra Industrial Q4 Earnings Miss, '22 View Solid
Altra Industrial reported mixed results for fourth-quarter 2021. The company’s earnings lagged the Zacks Consensus Estimate by 10.67% and its sales surpassed the same by 1.80%.
Non-GAAP earnings in the quarter under review were 67 cents per share, lagging the Zacks Consensus Estimate of 75 cents. The bottom line declined 11.8% from the year-ago figure of 76 cents, as supply-chain woes, labor problems, and high costs and expenses more than offset the impacts of sales growth.
In 2021, the company’s non-GAAP earnings were $3.22 per share, increasing 11.8% year over year. The bottom line lagged the Zacks Consensus Estimate of $3.31.
Revenue Details
In the reported quarter, Altra Industrial’s revenues were $469.8 million, reflecting an increase of 3.7% from the year-ago number. Organic sales in the reported quarter expanded 4.1%, driven by healthy end-market businesses, including factory automation, specialty machinery, turf & garden, agriculture, construction and material handling. Foreign currency translation left a negative impact of 0.4%.
Also, the company’s revenues surpassed the Zacks Consensus Estimate of $462 million.
On a geographical basis, AIMC’s organic sales expanded 12.4% year over year in North America and increased 10.6% in Europe. However, sales in the Asia Pacific/Rest of World decreased 20.2%.
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 $233.7 million, increasing 12.4% year over year. Organic sales in the quarter expanded 13% year over year.
Automation & Specialty’s sales were $237.1 million in the fourth quarter, down 3.9% from the year-ago reported quarter. Organic sales decreased 3.6% from the year-ago quarter.
In 2021, the company’s revenues totaled $1.9 billion, increasing 10.1% year over year. Also, its yearly sales surpassed the Zacks Consensus Estimate of $1.89 billion.
Margin Profile
In the reported quarter, Altra Industrial’s cost of sales increased 7.1% year over year to $311.9 million. Notably, the cost of sales represented 66.4% of net sales. Non-GAAP gross profit was $157.9 million, down 2.5% year over year. The gross margin (non-GAAP) decreased 210 basis points (bps) year over year to 33.6%.
Selling, general and administrative expenses (non-GAAP) increased 7% year over year to $73.7 million and represented 15.7% of net sales. Research and development expenses (non-GAAP) were $16.4 million versus $15.2 million in the year-ago quarter.
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $87.2 million, the margin being 18.6%. The non-GAAP operating income in the reported quarter decreased 12.9% year over year to $67.8 million, with the non-GAAP operating margin decreasing 280 bps to 14.4%.
The company suffered from the adverse impacts of inflation, labor shortages and supply-chain headwinds.
Net interest expenses totaled $45 million in the reported quarter, reflecting an increase from $17.9 million in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fourth quarter of 2021, Altra Industrial’s cash and cash equivalents were $246.1 million, decreasing 4.2% from $256.8 million recorded in the last reported quarter. Long-term debt was $1,401 million, reflecting an 8.6% increase from $1,289.7 million in the last reported quarter.
In 2021, the company repaid $1,030 million of borrowings under its term-loan facility and $5 million under the revolving credit facility. Borrowings amounted to $400 million from the term-loan facility and $610 million under the revolving credit facility.
In 2021, it generated net cash of $217 million from operating activities, down 17.3% from the previous year. Capital invested for purchasing property, plant and equipment totaled $40.6 million, increasing 20.5% year over year. Non-GAAP free cash flow (adjusted) was $176.4 million versus $263.5 million in the previous year.
In 2021, the company paid out dividends amounting to $18.3 million, down from $27.8 million distributed in the previous year.
Also, on the same day, the company signed an agreement to divest its Jacobs Vehicle Systems business for $325 million to Cummins Inc. Pending the receipt of regulatory approvals and the fulfillment of customary closing conditions, the company expects the divestiture to be complete by 2022-end.
Outlook
Altra Industrial believes that healthy demand, effective pricing and synergies from buyouts will be beneficial in the quarter ahead. However, supply-chain issues, along with inflation and labor problems, are concerning for the first half of 2022.
For 2022, the company anticipates sales of $2,025-$2,065 million. Organic sales growth is predicted to be 5-7%.
Non-GAAP earnings are expected to be $3.55-$3.70 and non-GAAP adjusted EBITDA is likely to be $410-$425 million. The tax rate is anticipated to be 21-23%.
Cash flow from operations is expected to be $245-$275 million for 2022, while capital expenditure is likely to be $45-$50 million. Free cash flow (non-GAAP) is predicted to be $200-$225 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -11.31% due to these changes.
VGM Scores
At this time, Altra has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Altra has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Altra (AIMC) Down 11.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Altra Industrial Motion . Shares have lost about 11.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Altra due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Altra Industrial Q4 Earnings Miss, '22 View Solid
Altra Industrial reported mixed results for fourth-quarter 2021. The company’s earnings lagged the Zacks Consensus Estimate by 10.67% and its sales surpassed the same by 1.80%.
Non-GAAP earnings in the quarter under review were 67 cents per share, lagging the Zacks Consensus Estimate of 75 cents. The bottom line declined 11.8% from the year-ago figure of 76 cents, as supply-chain woes, labor problems, and high costs and expenses more than offset the impacts of sales growth.
In 2021, the company’s non-GAAP earnings were $3.22 per share, increasing 11.8% year over year. The bottom line lagged the Zacks Consensus Estimate of $3.31.
Revenue Details
In the reported quarter, Altra Industrial’s revenues were $469.8 million, reflecting an increase of 3.7% from the year-ago number. Organic sales in the reported quarter expanded 4.1%, driven by healthy end-market businesses, including factory automation, specialty machinery, turf & garden, agriculture, construction and material handling. Foreign currency translation left a negative impact of 0.4%.
Also, the company’s revenues surpassed the Zacks Consensus Estimate of $462 million.
On a geographical basis, AIMC’s organic sales expanded 12.4% year over year in North America and increased 10.6% in Europe. However, sales in the Asia Pacific/Rest of World decreased 20.2%.
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 $233.7 million, increasing 12.4% year over year. Organic sales in the quarter expanded 13% year over year.
Automation & Specialty’s sales were $237.1 million in the fourth quarter, down 3.9% from the year-ago reported quarter. Organic sales decreased 3.6% from the year-ago quarter.
In 2021, the company’s revenues totaled $1.9 billion, increasing 10.1% year over year. Also, its yearly sales surpassed the Zacks Consensus Estimate of $1.89 billion.
Margin Profile
In the reported quarter, Altra Industrial’s cost of sales increased 7.1% year over year to $311.9 million. Notably, the cost of sales represented 66.4% of net sales. Non-GAAP gross profit was $157.9 million, down 2.5% year over year. The gross margin (non-GAAP) decreased 210 basis points (bps) year over year to 33.6%.
Selling, general and administrative expenses (non-GAAP) increased 7% year over year to $73.7 million and represented 15.7% of net sales. Research and development expenses (non-GAAP) were $16.4 million versus $15.2 million in the year-ago quarter.
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $87.2 million, the margin being 18.6%. The non-GAAP operating income in the reported quarter decreased 12.9% year over year to $67.8 million, with the non-GAAP operating margin decreasing 280 bps to 14.4%.
The company suffered from the adverse impacts of inflation, labor shortages and supply-chain headwinds.
Net interest expenses totaled $45 million in the reported quarter, reflecting an increase from $17.9 million in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fourth quarter of 2021, Altra Industrial’s cash and cash equivalents were $246.1 million, decreasing 4.2% from $256.8 million recorded in the last reported quarter. Long-term debt was $1,401 million, reflecting an 8.6% increase from $1,289.7 million in the last reported quarter.
In 2021, the company repaid $1,030 million of borrowings under its term-loan facility and $5 million under the revolving credit facility. Borrowings amounted to $400 million from the term-loan facility and $610 million under the revolving credit facility.
In 2021, it generated net cash of $217 million from operating activities, down 17.3% from the previous year. Capital invested for purchasing property, plant and equipment totaled $40.6 million, increasing 20.5% year over year. Non-GAAP free cash flow (adjusted) was $176.4 million versus $263.5 million in the previous year.
In 2021, the company paid out dividends amounting to $18.3 million, down from $27.8 million distributed in the previous year.
Also, on the same day, the company signed an agreement to divest its Jacobs Vehicle Systems business for $325 million to Cummins Inc. Pending the receipt of regulatory approvals and the fulfillment of customary closing conditions, the company expects the divestiture to be complete by 2022-end.
Outlook
Altra Industrial believes that healthy demand, effective pricing and synergies from buyouts will be beneficial in the quarter ahead. However, supply-chain issues, along with inflation and labor problems, are concerning for the first half of 2022.
For 2022, the company anticipates sales of $2,025-$2,065 million. Organic sales growth is predicted to be 5-7%.
Non-GAAP earnings are expected to be $3.55-$3.70 and non-GAAP adjusted EBITDA is likely to be $410-$425 million. The tax rate is anticipated to be 21-23%.
Cash flow from operations is expected to be $245-$275 million for 2022, while capital expenditure is likely to be $45-$50 million. Free cash flow (non-GAAP) is predicted to be $200-$225 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -11.31% due to these changes.
VGM Scores
At this time, Altra has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Altra has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.