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Enerpac (EPAC) Surpasses Q2 Earnings and Revenue Estimates

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Enerpac Tool Group Corp. (EPAC - Free Report) reported solid second-quarter fiscal 2022 (ended Feb 28, 2022) results. Earnings in the quarter beat estimates by 40% and revenues topped the same by 4.5%.

The company’s adjusted earnings per share were 14 cents, beating the Zacks Consensus Estimate of 10 cents. The bottom line increased 133.3% from 6 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 $136.6 million, reflecting a 13.2% 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 beat the Zacks Consensus Estimate of $130.7 million.

Organic sales in the quarter under review were up 16% year over year, driven by 16% growth in product sales. Service revenues increased 13% year over year. Movements in foreign currency had an adverse impact of 2% on the quarter’s revenues.

The segmental information is briefly discussed below.

Industrial Tools & Services (92.2% of second-quarter fiscal 2022 net sales): Revenues in the reported quarter totaled $125.9 million, reflecting an 11.7% 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 (7.8% of net sales in second-quarter fiscal 2022): Revenues in the segment totaled $10.7 million, up 34.7% from the year-ago quarter.

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

Margin Profile

In the reported quarter, Enerpac Tool’s cost of sales grew 16.2% year over year to $76.6 million. It represented 56.1% of the quarter’s net sales compared with 54.6% in the year-ago quarter. The gross profit increased 9.5% to $60 million. The gross margin decreased 150 basis points to 43.9%.

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

Selling, administrative and engineering expenses increased 10.5% year over year to $50.7 million. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $16.4 million, up 42.6%. The adjusted EBITDA margin was 12% compared with 9.5% in the year-ago quarter.

Adjusted operating income was $11.7 million in the reported quarter, reflecting an improvement from $6.8 million in the year-ago quarter. The adjusted operating margin was 8.5% compared with 5.6% in the year-ago quarter. Net financing costs declined 43.6% to $0.8 million.

Balance Sheet and Cash Flow

Exiting the fiscal second quarter, Enerpac Tool’s cash and cash equivalents totaled $133.4 million, up 5.5% from $126.5 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 $10 million of revolving credit facility, and its borrowing from the same source was $10 million. Its net debt to adjusted EBITDA was 0.6X at the end of the fiscal second quarter versus 0.7X at the fiscal first-quarter end.

Enerpac Tool generated net cash of $9.4 million for its operating activities in the second quarter of fiscal 2022. It generated net operating cash of $4.6 million in the year-ago quarter. Capital spending totaled $1.5 million, down 58.7%. Free cash inflow in the quarter was $7.9 million compared with cash inflow of $0.8 million in the year-ago quarter.

In the quarter, the company did not pay out any cash dividend.

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 remain concerning.

For fiscal 2022, Enerpac Tool currently anticipates sales to be $560-$580 million compared with $590-$610 million projected earlier. It implies an increase from the year-ago tally of $528.7 million. Incremental adjusted EBITDA is expected to be 35-45% (maintained).

Stocks to Consider

Enerpac Tool currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the Zacks Industrial Products sectors are discussed below.

Lincoln Electric Holdings, Inc. (LECO - Free Report) presently carries a Zacks Rank #2 (Buy). The company delivered a four-quarter earnings surprise of 8.9%, on average.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The earnings estimates Lincoln have increased 2% for 2022 in the past 60 days. Its shares have jumped 0.2% in the past six months.

Wrap Technologies, Inc. (WRAP - Free Report) presently has a Zacks Rank #2. Its earnings surprise in the last reported quarter was 13.33%.

In the past 60 days, Wrap’s earnings estimates have increased 8.5% for 2022 in the past 60 days. Wrap’s shares have declined 58.6% in the past six months.

Ferguson plc (FERG - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 14.2%, on average.

In the past 60 days, Ferguson’s earnings estimates have increased 5.9% for fiscal 2022 (ending July 2022). FERG’s shares have gained 0.9% in the past six months.

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