Actuant Corporation (ATU), an industrial products and systems manufacturer, reported earnings per share of 38 cents in the second quarter of fiscal 2013 (ended Feb 28, 2013), beating the Zacks Consensus Estimate of 37 cents by a penny. However, the results lagged behind the year-ago earnings of 43 cents per share by 11.6%, primarily due to seasonality.
Total revenue of $370.4 million in the quarter beat the Zacks Consensus Estimate of $365.0 million by 1.5%. Core sales decreased 6.0% while acquisitions contributed 4.0%.
Cost & Margin Performance: Actuant’s cost of products sold was reported at $230.8 million in the quarter, a decline of 2.5% year over year. Gross profit decreased 123 basis points to $139.6 million and gross margin reached 37.7% for the quarter.
Selling, general and administrative expenses jumped 615 basis points year over year to $90.0 million in the quarter. Actuant reported an operating profit of $41.9 million compared with $49.5 million in the comparable quarter. Operating margin declined from 13.1% in the year ago quarter to 11.3% in the quarter, primarily due to lower sales and production levels.
Segment Performance: The Industrial segment posted a 0.7% year-over-year increase in revenues to $99.0 million. Core sales increased 1.0%, with a sales hike in North America and the Asia Pacific regions, being offset by a decline in Europe and China. The segment’s operating income was $26.4 million versus $$26.7 million in the year-ago quarter.
Energy segment’s revenues increased 2.4% year over year to $80.8 million. The increase can be attributed to a 3.0% gain from acquisitions and a 1.0% core sales decline. Maintenance spending in oil & gas, power generation and other energy markets was instrumental in driving growth. The segment reported an operating profit of $9.7 million, down from $11.6 million in the year-ago quarter.
Revenues at the Electrical segment dropped 9.3% year over year to $69.9 million, attributed to lower solar inverter sales and industrial transformer demand. The segment reported an operating profit of $5.1 million, down from $5.8 million in the year-ago quarter due to the benefit from prior year restructuring actions.
The Engineered Solution segment’s revenue decreased 2.3% to $120.7 million. Acquisitions contributed 10.0% to growth, which was offset by a 12.0% decline in core sales. Results reflected lower OEM production levels for heavy-duty trucks as well as a decline in automotive sales. The segment’s operating income declined to $8.3 million from $13.3 million in the prior-year quarter.
Balance Sheet/Cash Flow: Exiting the fiscal second quarter 2013, Actuant’s cash and cash equivalents were approximately $90.8 million, a considerable increase from the $68.3 million in the previous quarter. Total long-term debt stood at $385.0 million.
Cash flow from operations in the quarter was $28.0 million compared with $31.5 million in the year-ago comparable quarter. Total capital spending was roughly $4.0 million against $4.9 million spent in the quarter ending Feb 2012.
Outlook: For fiscal 2013, Actuant anticipates irregular end-market demand along with unfavorable economic conditions. Core sales are anticipated to decline in the range of 3%-5% as against fall of 1%-3% expected earlier. Full year revenue is expected in the band of $1.575 billion to $1.600 billion, down from the previous estimate of $1.600 billion to $1.625 billion.
Actuant expects its EPS guidance to range between $2.15 and $2.25, although forecasts difficulties in attaining earnings. In the third quarter of fiscal 2013, total sales are expected in the range of $410 million-$420 million and EPS between $0.63 and $0.68.
Actuant currently holds a Zacks Rank #2 (Buy). Other stocks worth a look in the diversified machinery industry include Avery Dennison Corporation (AVY); holding a Zacks Rank #1 (Strong Buy); also, Active Power Inc. (ACPW) and Briggs & Stratton Corporation (BGG), hold a Zacks Rank #2 (Buy).
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