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Actuant to Incur Hefty Charge in 4Q

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Actuant Corporation (ATU - Free Report) announced that it expects to incur an asset impairment charge worth $60 million in its fourth quarter 2012 due to poor performance of its Mastervolt business.

Actuant acquired Netherlands based Mastervolt in 2010 for $158 million. Mastervolt is a designer, developer and global supplier of highly innovative, branded power electronics, primarily for the solar and marine markets. The addition of Mastervolt augmented Actuant’s electrical segment's product offerings, including batteries, generators, battery chargers, inverters, display panels, wiring and fully integrated systems. It also extended its footprint in the global marine and European solar markets.

However, the business has performed lower than expected since its acquisition. The company stated that the charge was warranted due to its weak performance, reduced long term profit outlook for the brand and weaker economic conditions in Europe.

More details regarding this impairment charge will be provided on September 27, 2012 when Actual reports its fourth quarter and fiscal 2012 results. Excluding the impairment charge, fourth quarter results are expected to be in the upper end of the previous guidance range. The company during its third quarter earnings call had put forward a fourth quarter guidance with sales in the range of $400 million to $410 million and EPS in the band of 50 cents to 55 cents a share. For the fiscal fourth quarter, the Zacks Consensus Estimates for sales is at $410 million, at the upper end of the company guidance. The Zacks Consensus Estimate for EPS is at 54 cents, closer to the upper end of the guidance.

For fiscal 2012, the company estimates sales in the range of $1.60–1.61 billion and EPS in the $2.03–2.08 range. The Zacks Consensus Estimates for sales is $1.61 billion, at the upper end of the guidance and the same for EPS is at $2.07, a penny below the upper end of the company’s guidance.

In the third quarter, Actuant delivered adjusted EPS of 60 cents, a penny ahead of the Zacks Consensus Estimate and 19% above the year-ago quarter’s EPS of 51 cents. Solid results in the U.S. and the Energy segment helped offset some end-market softness in Europe and China. Total revenue of $429 million was in line with the Zacks Consensus Estimate but 9% above the year-ago revenue of $393 million. Core sales increased 4% and acquisitions contributed 8%. Weaker Euro had a negative impact of 3%.

Actuant’s acquisition pipeline is robust and given its strong balance sheet, it is well positioned to invest in growth opportunities and also fund share buybacks. However, uncertainty in Europe remains a headwind. We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.

Headquartered in Menomonee Falls, Wisconsin, Actuant Corporation designs, manufactures, and distributes industrial products and systems worldwide. It operates through four segments: Industrial, Energy, Electrical and Engineered Solutions. It competes with Eaton Corporation (ETN - Free Report) , Kennametal Inc. (KMT - Free Report) and Parker Hannifin Corporation (PH - Free Report)

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