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Altra Industrial Offers Solid Growth Potential, Runs Risks

AIT MIDD AIMC BWEN

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We issued an updated research report on Altra Industrial Motion Corp. (AIMC - Free Report) on Nov 28, 2016. The company is one of the leading manufacturers and distributors of a diversified range of mechanical power transmission, or MPT components. The company currently has a $917.6 million market capitalization.

Altra Industrial Motion has solid long-term growth potential, but the risks from near-term headwinds can restrict its growth momentum.

We believe Altra Industrial Motion is well positioned to reap benefits from a diversified product line, including clutches & brakes, couplings, and gearing & power transmission components. Also, operations in over 70 countries catering to needs of a vast customer base in the energy, general industrial, material handling, metals, mining, special machinery, transportation, and turf and garden industries is a boon for the company.    

In the quarters ahead, Altra Industrial Motion holds solid potential for organic and inorganic growth. The Stromag acquisition (announced in Oct 2016), upon completion, will start yielding earnings benefits in 2017. Also, the company is progressing well on its restructuring and cost-saving strategies. As part of these restructuring activities, the company completed five facility consolidations in the second quarter, while closed one facility in the third and another is scheduled for closure in fourth-quarter 2016. In 2017, the company anticipates closing one facility in the first quarter, while is evaluating options for one or two more closures in the rest of the year. Rewarding shareholders with dividends and share buybacks remain a priority.    

However, Altra Industrial Motion is exposed to risks arising from stiff competition and high costs. Difficulties or delays in research and development or production and services, apart from failure of new products and technologies in the market, may hurt the company’s position. Also, negative foreign currency movements are likely to hurt results.

For 2016, Altra Industrial Motion anticipates soft conditions to persist in its end markets, while improvements are likely, going into 2017. The company has narrowed its sales guidance to $705−$715 million and earnings predictions to $1.45−$1.50 per share. Previously, sales were guided within $700−$720 million range and earnings within $1.40−$1.50 per share range.

Altra Industrial Motion currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the machinery industry include Applied Industrial Technologies, Inc. (AIT - Free Report) , Broadwind Energy, Inc. (BWEN - Free Report) and Middleby Corporation (MIDD - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Applied Industrial Technologies posted an average positive earnings surprise of 4.93% in the last four quarters. Also, the earnings estimates for fiscal 2017 and fiscal 2018 have been revised upward over the past 60 days.

Broadwind Energy, Inc’s bottom-line estimates for 2016 and 2017 have been revised upward in the last 60 days. Also, Middleby Corporation reported better-than-expected results in the last four quarters, with an average positive earnings surprise of 15.93%. In addition, earnings estimates for 2016 and 2017 have improved over the past 60 days.

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