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Actuant Downgraded to Strong Sell

Zacks Equity Research

Zacks Investment Research downgraded Actuant Corporation (ATU) to a Zacks Rank #5 (Strong Sell) on Jun 22 based on  weak fiscal third quarter 2013 results combined with weak earnings outlook for the quarters ahead.

Why the Downgrade?

Actuant reported earnings per share of 62 cents in the fiscal third quarter of 2013, missing the Zacks Consensus Estimate by a penny. Revenue was reported at $344.2 million, roughly flat compared with the Zacks Consensus Estimate as well as the year-ago quarter.

Core sales declined 2%, which were offset by a contribution from the acquisitions. Foreign currency adjustments were detrimental to sales growth. Actuant foresees that the core sales would witness a downward trend in the coming quarters, although the acquired businesses are expected to counter it.

Actuant expects to see a low GDP growth situation in fiscal 2014, impacting its revenues. It has thereby guided total revenue in fiscal 2014 to be in the range of $1.315 million to $1.340 million, with earnings per share in the range of $1.95 to $2.05. However, recently, Actuant made public its intentions to divest the Electrical segment to focus more on its growth drivers. The same has now been recorded as discontinued operations in the financials.  

Subsequent to the results, Actuant has witnessed a downward revision for most of its estimates for fiscal years 2013 and 2014. Almost all the estimates have been revised downwards for fiscal 2013, resulting in a decline of the Zacks Consensus Estimate by 13.4% to $1.88 per share, over the last 7 days. Same holds good for fiscal 2014, where the Zacks Consensus Estimate declined by 14.6% to $2.04 per share for the same period.

Other Stocks to Consider

Not all machinery stocks are performing as poorly as Actuant. The following stocks with favorable Zacks Rank are performing well and are worth considering.

1. Lincoln Electric Holdings Inc. (LECO) carries a Zacks Rank #2 (Buy)

2. AGCO Corporation (AGCO) holds a Zacks Rank #2 (Buy)

3. Alamo Group, Inc. (ALG) holds a Zacks Rank #2 (Buy).

Read the Full Research Report on AGCO

Read the Full Research Report on LECO

Read the Full Research Report on ATU

Read the Full Research Report on ALG

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