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Enerpac Tool Declines 36% YTD: What's Hurting the Stock?

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Shares of Enerpac Tool Group Corp. EPAC have declined sharply since the beginning of 2020. We believe that the price decline primarily reflects investors’ reactions to the company’s second-quarter fiscal 2020 (ended Feb 29, 2020) results and global uncertainties.

The Menomonee Falls, WI-based company belongs to the Zacks Manufacturing – Tools & Related Products industry, which, in turn, comes under the ambit of the Zacks Industrial Products sector. The industry is currently at the bottom 7% (with the rank of 236) of more than 250 Zacks industries.

Year to date, the company’s shares have dipped 35.5% compared with the industry’s decline of 33.6% and the sector’s fall of 25.9%. Notably, the S&P 500 has declined 17.2% during the same period.


The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Affecting the Stock

So far in 2020, Enerpac Tool has reported results for second-quarter fiscal 2020. Results were weaker than expected, with earnings and sales lagging the Zacks Consensus Estimate by 25% and 2.8%, respectively. Organic sales in the quarter were down 10% due to a 4% fall in product sales and a 28% decline in service revenues.

In addition to the dismal performance, prevailing uncertainties worldwide must have added to the bearish sentiments for the stock. Fluctuations in oil prices as well as the coronavirus outbreak (that had $2-million adverse impact on revenues in the second quarter) have made Enerpac Tool suspend its projections for fiscal 2020 (ending August 2020).

Earlier, the company had expected adjusted earnings of 68-81 cents per share for fiscal 2020. Sales were expected to be $575-$600 million, while adjusted earnings before interest, tax, depreciation and amortization were anticipated to be $94-$104 million. Free cash was estimated to be $50-$75 million.

Also, risks arising from geopolitical issues, unfavorable movements in foreign currencies and several environmental headwinds might hurt sentiments for the company. However, gains from restructuring measures, growth investments, inorganic activities and rewards to shareholders through share buybacks and dividends might benefit.

Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at 52 cents per share for fiscal 2020 and 78 cents for fiscal 2021 (ending August 2021), marking declines of 30.7% and 27.1% from the respective 60-day-ago figures. Notably, there were four downward revisions in estimates for both years. No upward revision in estimates has been recorded in the past 60 days.

Such downward revisions in earnings estimates are reflective of bearish sentiments for the company.

Enerpac Tool’s Performance Versus Three Industry Players

The company underperformed three industry players in the year-to-date period. Three such stocks are Stanley Black & Decker, Inc. SWK, Lincoln Electric Holdings, Inc. LECO and Sandvik AB SDVKY, with respective year-to-date declines of 35.2%, 24.8% and 27.2%.

It is worth mentioning here Stanley Black & Decker has expressed concerns over the adverse impacts of the pandemic on its revenue-generation capabilities in the near term. Also, it has temporarily halted its acquisition activities and is thinking of lowering its capital spending. The company has suspended its projections for 2020.

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