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Altra Industrial (AIMC) Down 4.5% Since Q3 Earnings Release
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Altra Industrial Motion Corp. reported lackluster results for third-quarter 2022. AIMC’s earnings and sales missed the Zacks Consensus Estimate by 3.6% and 0.4%, respectively. Shares of the company declined 4.5% since the earnings release on Oct 31.
Adjusted earnings in the quarter under review were 80 cents per share, missing the Zacks Consensus Estimate of 83 cents. However, the bottom line came in line with the year-ago quarter.
On Oct 27, the company announced that it has inked a deal to be acquired by Regal Rexnord Corporation (Regal Rexnord), for a sum of $5.0 billion on an enterprise value basis. Per the deal, the shareholders will receive $62.00 (a 54% premium to the closing price of the company’s common stock on Oct 26) in cash for each share of AIMC. Subject to customary closing conditions, the transaction will likely close in the first half of 2023.
Revenue Details
In the reported quarter, Altra Industrial’s revenues were $466.3 million, reflecting a decrease of 0.6% from the year-ago comparable period due to the divestiture of the JVS business and changes in foreign exchange rates. Organic sales in the reported quarter expanded 1.9%, driven by healthy end-market businesses, including aerospace and defense, factory automation as well as turf and garden. The Nook acquisition had a positive impact of 2.5% on sales. Foreign currency translation left a negative impact of 5%.
Altra Industrial’s revenues missed the Zacks Consensus Estimate of $467 million.
Altra Industrial reports revenues under two heads, namely Automation & Specialty and Transmission Technologies. A brief snapshot of the segmental sales is provided below:
Revenues generated from Power Transmission Technologies amounted to $239.3 million, increasing 2.9% year over year, driven by strength across end markets, including metals and mining, turf and garden as well as agriculture end markets. Favorable pricing had an impact of $13.8 million on net sales. However, foreign currency had an adverse impact of $12.8 million on net sales in the quarter.
Automation & Specialty’s sales were $228.6 million in the third quarter, down 3.9% from the year-ago quarter. The JVS business divestiture had an unfavorable impact of $41.3 million on sales and foreign woes decreased sales by $10.7 million in the quarter.
In the reported quarter, Altra Industrial’s cost of sales decreased 0.6% year over year to $297.6 million. The cost of sales represented 63.8% of net sales. Adjusted gross profit was $168.7 million, down 0.7% year over year. The gross margin (adjusted) was in line with the year-ago figure of 36.2%.
Selling, general and administrative expenses (adjusted) decreased 3.9% year over year to $88.3 million and represented 18.9% of net sales. Research and development expenses (adjusted) were $15.0 million compared with $15.5 million in the year-ago quarter.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $92.1 million, the margin being 19.8%. The adjusted operating income in the reported quarter decreased 1.9% year over year to $79.1 million, with the adjusted operating margin decreasing 20 bps to 17%.
Altra Industrial suffered the adverse impacts of inflation, labor shortages and supply-chain headwinds.
Net interest expenses totaled $13.7 million in the reported quarter, reflecting a decrease from $14.9 million in the year-ago quarter.
Balance Sheet and Cash Flow
While exiting the third quarter of 2022, Altra Industrial’s cash and cash equivalents were $198.2 million, down 19.5% from $246.1 million recorded in the fourth quarter of 2021. Long-term debt was $1,038.2 million, reflecting a 25.9% decrease from $1,401 million in the fourth quarter of 2021.
In the first nine months of 2022, AIMC repaid $7.5 million of borrowings under its term-loan facility and $345 million under the revolving credit facility. Altra Industrial didn’t borrow any amount from the term-loan facility. However, it borrowed $15 million from the revolving credit facility in the reported period.
In the first nine months, AIMC generated net cash of $72.5 million from operating activities compared with $170.1 million generated in the year-ago period. Capital invested in purchasing property, plant and equipment totaled $42.7 million, increasing 66.8% year over year.The adjusted free cash flow (adjusted) was $29.8 million compared with $144.5 million cash inflow in the previous year’s period.
In the first nine months, Altra Industrial paid out dividends amounting to $16.4 million, up from $13.1 million distributed in the year-ago quarter.
Dividend Update
On Nov 2, AIMC’s board of directors approved a quarterly cash dividend of 9 cents per share for its shareholders of record as of Dec 16, 2022. The disbursement will be made on Jan 3, 2023.
Zacks Rank & Stocks to Consider
AIMC currently carries a Zacks Rank #4 (Sell).
Some better-ranked companies from the Industrial Products sector are discussed below:
EPAC’s earnings estimates have increased 9.1% for fiscal 2023 (ending August 2023) in the past 60 days. The company’s shares have gained 29.6% in the past six months.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently has a Zacks Rank #1 and a trailing four-quarter earnings surprise of 24.8%, on average.
AIT’s earnings estimates have increased 3% for fiscal 2023 (ending June 2023) in the past 60 days. The company’s shares have risen 19.7% in the past six months.
IDEX Corporation (IEX - Free Report) presently has a Zacks Rank of 2 (Buy). IEX’s earnings surprise in the last four quarters was 5.7%, on average.
In the past 60 days, IDEX’s earnings estimates have increased 1.8% for 2022. The stock has rallied 19.7% in the past six months.
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Altra Industrial (AIMC) Down 4.5% Since Q3 Earnings Release
Altra Industrial Motion Corp. reported lackluster results for third-quarter 2022. AIMC’s earnings and sales missed the Zacks Consensus Estimate by 3.6% and 0.4%, respectively. Shares of the company declined 4.5% since the earnings release on Oct 31.
Adjusted earnings in the quarter under review were 80 cents per share, missing the Zacks Consensus Estimate of 83 cents. However, the bottom line came in line with the year-ago quarter.
On Oct 27, the company announced that it has inked a deal to be acquired by Regal Rexnord Corporation (Regal Rexnord), for a sum of $5.0 billion on an enterprise value basis. Per the deal, the shareholders will receive $62.00 (a 54% premium to the closing price of the company’s common stock on Oct 26) in cash for each share of AIMC. Subject to customary closing conditions, the transaction will likely close in the first half of 2023.
Revenue Details
In the reported quarter, Altra Industrial’s revenues were $466.3 million, reflecting a decrease of 0.6% from the year-ago comparable period due to the divestiture of the JVS business and changes in foreign exchange rates. Organic sales in the reported quarter expanded 1.9%, driven by healthy end-market businesses, including aerospace and defense, factory automation as well as turf and garden. The Nook acquisition had a positive impact of 2.5% on sales. Foreign currency translation left a negative impact of 5%.
Altra Industrial’s revenues missed the Zacks Consensus Estimate of $467 million.
Altra Industrial reports revenues under two heads, namely Automation & Specialty and Transmission Technologies. A brief snapshot of the segmental sales is provided below:
Revenues generated from Power Transmission Technologies amounted to $239.3 million, increasing 2.9% year over year, driven by strength across end markets, including metals and mining, turf and garden as well as agriculture end markets. Favorable pricing had an impact of $13.8 million on net sales. However, foreign currency had an adverse impact of $12.8 million on net sales in the quarter.
Automation & Specialty’s sales were $228.6 million in the third quarter, down 3.9% from the year-ago quarter. The JVS business divestiture had an unfavorable impact of $41.3 million on sales and foreign woes decreased sales by $10.7 million in the quarter.
Altra Industrial Motion Corp. Price and Consensus
Altra Industrial Motion Corp. price-consensus-chart | Altra Industrial Motion Corp. Quote
Margin Profile
In the reported quarter, Altra Industrial’s cost of sales decreased 0.6% year over year to $297.6 million. The cost of sales represented 63.8% of net sales. Adjusted gross profit was $168.7 million, down 0.7% year over year. The gross margin (adjusted) was in line with the year-ago figure of 36.2%.
Selling, general and administrative expenses (adjusted) decreased 3.9% year over year to $88.3 million and represented 18.9% of net sales. Research and development expenses (adjusted) were $15.0 million compared with $15.5 million in the year-ago quarter.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $92.1 million, the margin being 19.8%. The adjusted operating income in the reported quarter decreased 1.9% year over year to $79.1 million, with the adjusted operating margin decreasing 20 bps to 17%.
Altra Industrial suffered the adverse impacts of inflation, labor shortages and supply-chain headwinds.
Net interest expenses totaled $13.7 million in the reported quarter, reflecting a decrease from $14.9 million in the year-ago quarter.
Balance Sheet and Cash Flow
While exiting the third quarter of 2022, Altra Industrial’s cash and cash equivalents were $198.2 million, down 19.5% from $246.1 million recorded in the fourth quarter of 2021. Long-term debt was $1,038.2 million, reflecting a 25.9% decrease from $1,401 million in the fourth quarter of 2021.
In the first nine months of 2022, AIMC repaid $7.5 million of borrowings under its term-loan facility and $345 million under the revolving credit facility. Altra Industrial didn’t borrow any amount from the term-loan facility. However, it borrowed $15 million from the revolving credit facility in the reported period.
In the first nine months, AIMC generated net cash of $72.5 million from operating activities compared with $170.1 million generated in the year-ago period. Capital invested in purchasing property, plant and equipment totaled $42.7 million, increasing 66.8% year over year.The adjusted free cash flow (adjusted) was $29.8 million compared with $144.5 million cash inflow in the previous year’s period.
In the first nine months, Altra Industrial paid out dividends amounting to $16.4 million, up from $13.1 million distributed in the year-ago quarter.
Dividend Update
On Nov 2, AIMC’s board of directors approved a quarterly cash dividend of 9 cents per share for its shareholders of record as of Dec 16, 2022. The disbursement will be made on Jan 3, 2023.
Zacks Rank & Stocks to Consider
AIMC currently carries a Zacks Rank #4 (Sell).
Some better-ranked companies from the Industrial Products sector are discussed below:
Enerpac Tool Group Corp. (EPAC - Free Report) delivered an average four-quarter earnings surprise of 3.4%. EPAC presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.
EPAC’s earnings estimates have increased 9.1% for fiscal 2023 (ending August 2023) in the past 60 days. The company’s shares have gained 29.6% in the past six months.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently has a Zacks Rank #1 and a trailing four-quarter earnings surprise of 24.8%, on average.
AIT’s earnings estimates have increased 3% for fiscal 2023 (ending June 2023) in the past 60 days. The company’s shares have risen 19.7% in the past six months.
IDEX Corporation (IEX - Free Report) presently has a Zacks Rank of 2 (Buy). IEX’s earnings surprise in the last four quarters was 5.7%, on average.
In the past 60 days, IDEX’s earnings estimates have increased 1.8% for 2022. The stock has rallied 19.7% in the past six months.