Altra Industrial Motion Corp. (AIMC - Free Report) hosted Investors Day 2019 on May 14. The machinery company discussed its priorities, long-term growth targets and projections for 2019.
The company noted that its technological expertise, geographically diversified businesses (presence in 17 countries), and effective business system will be advantageous for boosting shareholder value in the years ahead. In addition, an experienced management team, solid production capabilities (with facilities more than 50) and dividend policy will be boons.
The company’s business collaboration with four companies of the Automation and Specialty business of Fortive Corporation (FTV - Free Report) (in October 2018) brightened its appeal. The combined company, with revenues of $1.8 billion, will be a global leader in motion control and power transmission, with greater access to end-markets, solid product offering for customers and better technological expertise. This business combination is likely to yield synergies toward the high end of $10-$12 million in 2019.
Altra Industrial also stressed on the fact that its businesses are placed well for growth and it is currently working hard for deleveraging its balance sheet.
Long-Term Financial Targets
For the five-year (2018-2022) period, the company anticipates adjusted earnings before interest, tax, depreciation and amortization (EBITDA) margin to improve from 20.3% in 2017 to 24.6% in 2022. The improvement of 425 basis points over the period is anticipated to be driven by positive impacts of volume/leverage mix and cost improvement, mainly based on collaborations with Fortive’s businesses. The cost improvement actions include consolidation of Kollmorgen’s operations in Brazil, relocation of Kollmorgen & Thomson businesses in China, and restructuring of overlapping product lines (targeted to be completed in the fourth quarter of 2019). In addition, direct synergies of $52 million are anticipated from the Fortive’s deal by 2022.
Further, the company anticipates gaining from pricing actions, cross-selling programs (likely to bring in $10 million new orders by 2020), supply-chain initiatives, working capital improvement program and end-market (especially mining, agriculture, and oil & gas) improvements.
As far as deleveraging of the balance sheet is concerned, the company noted that strong free cash flow generation (expected to be more than $1 billion in five years) will help it pay down debts. It targets net debt/adjusted EBITDA ratio of 3.5 in 2019, lower than 3.9 recorded in 2018, while anticipates achieving less than 3.0 in 2020.
Maintains Projection for 2019
In addition to its long-term targets, Altra Industrial informed that it is maintaining financial projections for 2019. A snapshot of the guidance is provided below.
For 2019, the company expects sales to be $1,920-$1,950 million while non-GAAP earnings are expected to be $3.02-$3.18 per share. Non-GAAP adjusted EBITDA is anticipated to be $415-$430 million.
The tax rate is anticipated to be around 24-25.8% while capital spending is expected to be approximately $60-$65 million.
Zacks Rank & Stocks to Consider
With a market capitalization of $2.2 billion, Altra Industrial currently carries a Zacks Rank #3 (Hold). In the past three months, the company’s shares have increased 8.5% against the industry’s growth of 4.5%.
Moreover, in the past 30 days, the Zacks Consensus Estimate for the company’s earnings increased 0.3% to $3.17 for 2019 and decreased 1.4% to $3.58 for 2020.
Altra Industrial Motion Corp. Price and Consensus