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Altra Industrial (AIMC) Up 9.5% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Altra Industrial Motion Corp. (AIMC - Free Report) . Shares have added about 9.5% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 catalysts.

Altra Industrial Tops Q2 Earnings, Revenues, Ups View

Altra Industrial Motion reported impressive results for second-quarter 2017, with earnings and revenues surpassing their respective Zacks Consensus Estimate by 11.76% and 1.15%.

The quarter's non-GAAP earnings of $0.57 per share topped the Zacks Consensus Estimate of $0.51. Also, the bottom line increased 35.7% from the year-ago quarter's tally of $0.42.

Revenues totaled $223.4 million, increasing 22.3% year over year. The improvement was triggered by 4% growth in organic revenues and 18.3% positive impact from the Stromag acquisition.

Also, the top line was above the Zacks Consensus Estimate of $221 million.

Segmental Details: Altra Industrial Motion reports its revenues under the following heads/segments - Couplings Clutches & Brakes, Electromagnetic Clutches & Brakes, and Gearing. A brief snapshot of the segmental sales has been provided below:

Revenues generated from Electromagnetic Clutches & Brakes segment were $8.16 million, up 15.5% year over year.

Couplings Clutches & Brakes segment's sales were $12 million, surging 58.9% from the year-ago quarter.

Gearing segment's revenues inched up 0.1% year over year to $49.1 million.

Margins: In the quarter, Altra Industrial Motion's margins profile improved on the back of revenue growth, partially offset by costs and operating expenses. Cost of sales increased 21.5% year over year while as a percentage of revenues it represented 67.7% versus 68.1% in the year-ago quarter. Gross margin improved 40 basis points (bps) to 32.3%. Selling, general and administrative expenses were roughly $41.6 million, accounting for 18.6% of revenues.

Non-GAAP operating margin in the quarter was 11.2% versus 10% in the year-ago quarter.

Balance Sheet & Cash Flow: Exiting the second quarter, Altra Industrial Motion's cash and cash equivalents were $59 million, up from $52.9 million in the preceding quarter. Long-term debt was $308 million, down 3% sequentially.

In the first half of 2017, the company's net cash generated from operating activities fell roughly 15% year over year to $26 million. Capital spending was $14.4 million, up from $10.9 million in the year-ago period. During the period, the company paid dividends amounting to $8.3 million.

Outlook: For 2017, Altra Industrial Motion anticipates benefiting from the steadily improving end-markets, savings from cost-reduction initiatives and synergistic benefits from the Stromag acquisition. On the back of these expectations as well as impressive first-half results, the company increased its revenue guidance to $850-$865 million from the previous projection of $840-$855 million.

Non-GAAP earnings are anticipated to be within $1.95-$2.05 per share, up from the earlier forecast of $1.83-$1.93. Tax rate will be 29-31% while capital spending will be within $25-$30 million.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.

Altra Industrial Motion Corp. Price and Consensus

 

VGM Scores

At this time, the stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.




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