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Actuant (ATU) Beats Q2 Earnings, Misses Revenue Estimates

Zacks Equity Research

Actuant Corporation ATU reported mixed results for second-quarter fiscal 2019 (ended Feb 28, 2019), with earnings beating the Zacks Consensus Estimate and revenues lagging the same.

This industrial tool maker’s adjusted earnings per share in the reported quarter amounted to 19 cents, which surpassed the Zacks Consensus Estimate of 17 cents. On a year-over-year basis, the bottom line rallied 46.2% from the year-ago quarter’s tally of 13 cents. The improvement can be attributed to healthy growth in operating profit and higher margins. Notably, the quarter marked the company’s fourth consecutive quarter of positive earnings beat.

Revenues

Actuant generated sales worth $271.9 million in the reported quarter, down 1.2% from the year-ago quarter’s tally. The company’s organic sales grew 7% in the reported quarter. However, this was more than offset by 4% adverse impact of unfavorable movements in foreign currencies as well as 4% adverse impact from the divestiture of Precision-Hayes International and Cortland Fibron.

Notably, the top line lagged the Zacks Consensus Estimate of $274 million by roughly 0.7%.

Actuant Corporation Price, Consensus and EPS Surprise

 

Actuant Corporation Price, Consensus and EPS Surprise | Actuant Corporation Quote

 

The company reports net sales under two segments — Industrial Tools & Services (IT&S) and Engineered Components & Systems (EC&S). The segmental information is briefly discussed below.

Industrial Tools & Services(55% of second-quarter fiscal 2019 net sales): revenues in the segment totaled $149.5 million, up 9.1% from the year-ago quarter’s tally. Core sales rose 12% on a year-over-year basis.

Engineered Components & Systems(45% of second-quarter fiscal 2019 net sales): Revenues in the segment amounted to $122.4 million, down 11.4% from the year-ago quarter’s tally. Core sales in the segment were flat year over year.

Margins Improve Y/Y

In the reported quarter, Actuant’s cost of sales declined 6% year over year to $174.4 million. The figure contributed 64.1% to sales compared with 67.4% in the year-ago quarter. Gross margin improved 330 basis points (bps) year over year to 35.9%. Selling, administrative and engineering expenses increased 3.5% year over year to $70.7 million. As a percentage of sales, it contributed 26% compared with 24.8% in the year-ago quarter.

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) were $30.1 million, up 12.3% year over year. Adjusted EBITDA margin in the reported quarter was 11.1% versus 9.7% in the year-ago quarter. Adjusted operating income increased 36.2% year over year to $23.3 million and adjusted operating margin grew 240 bps to 8.6%.

Balance Sheet and Cash Flow

Actuant exited the quarter with cash and cash equivalents of $170.4 million, down 16.2% from $203.4 million at the end of the last reported quarter. Long-term debt balance fell 8% sequentially to $455.6 million.

In the quarter under review, the company used cash worth $22.2 million for operating activities, up from $1.6 million in the year-ago quarter. Capital expenditure totaled $8 million compared with $4.6 million in the year-ago quarter.

Events

As disclosed, Actuant completed the divestiture of Precision-Hayes International business on Dec 31, 2018. Further, the company announced its plan to sell the Engineered Components & Systems segment.

Outlook

For fiscal 2019, Actuant reaffirmed adjusted earnings per share projection of $1.09-$1.20. Sales projection has also been reaffirmed at $1.15-$1.19 billion. Free cash flow is expected in the range of $80-$85 million.

For the fiscal third quarter, adjusted earnings are anticipated to be 40-45 cents per share and sales are likely to be $295-$305 million.

Zacks Rank & Key Picks

Actuant currently carries a Zacks Rank #3(Hold).

Some better-ranked stocks in the same space are DXP Enterprises, Inc DXPE, Roper Technologies, Inc ROP and Tetra Tech, Inc TTEK. While DXP Enterprises sports a Zacks Rank #1 (Strong Buy), Roper and Tetra Tech carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises surpassed estimates thrice in the trailing four quarters, the average being 46.55%.

Roper exceeded estimates in each of the trailing four quarters, the average being 4.96%.

Tetra Tech surpassed estimates in each of the trailing four quarters, the average being 7.34%.

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