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Altra Industrial Motion Corp. AIMC reported weaker-than-expected results for the third quarter of 2021. Its earnings lagged the Zacks Consensus Estimate by 2.44%. This came in after six quarters of earnings beats. Also, sales in the quarter lagged estimates by 0.31%.
The company’s non-GAAP earnings were 80 cents per share in the reported quarter, lagging the Zacks Consensus Estimate of 82 cents. The bottom line decreased 8% from the year-ago quarter’s 87 cents.
In the reported quarter, Altra Industrial’s revenues were $469.3 million, reflecting an increase of 7.2% from the year-ago number. Foreign currency translation had a positive impact of 1.4%. Organic sales in the reported quarter expanded 5.8%, driven by healthy end-market businesses, including material handling, factory automation, specialty machinery, turf & garden, agriculture, and construction.
Also, the company’s revenues lagged the Zacks Consensus Estimate of $471 million.
On a geographical basis, the company’s organic sales expanded 12.4% year over year in North America and increased 11.5% in Europe. However, sales in the Asia Pacific/Rest of World decreased 15.3%.
Altra Industrial reports revenues under two heads — Automation & Specialty, and Power Transmission Technologies. A brief snapshot of the segmental sales is provided below:
Revenues generated from Power Transmission Technologies amounted to $232.5 million, increasing 17.6% year over year. Organic sales in the quarter expanded 16% year over year.
Automation & Specialty’s sales were $237.8 million in the third quarter, down 1.2% from the year-ago reported quarter. Organic sales decreased 2.6% from the year-ago quarter.
In the reported quarter, Altra Industrial’s cost of sales increased 9.4% year over year to $299.4 million. Notably, the cost of sales represented 63.8% of net sales. Non-GAAP gross profit was $169.9 million, up 3.5% year over year. The gross margin (non-GAAP) decreased 130 basis points (bps) year over year to 36.2%. The company suffered from the adverse impacts of inflation, labor shortages, and supply-chain headwinds.
Selling, general and administrative expenses (non-GAAP) increased 11.4% year over year to $91.9 million and represented 19.6% of net sales. Research and development expenses (non-GAAP) were $15.5 million versus $13.8 million in the year-ago quarter.
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $97 million, the margin being 20.7%. The non-GAAP operating income in the reported quarter decreased 6% year over year to $80.6 million, with the non-GAAP operating margin decreasing 240 bps to 17.2%.
Net interest expenses totaled $16.1 million in the reported quarter, reflecting a decrease of 10.6% from the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the third quarter of 2021, Altra Industrial’s cash and cash equivalents were $256.8 million, decreasing 7.6% from $277.8 million recorded in the last reported quarter. Long-term debt was $1,289.7 million, reflecting a 5.1% decline from $1,359.3 million in the last reported quarter.
In the first three quarters of 2021, the company repaid $120 million of borrowings under its term-loan facility.
In the first three quarters of 2021, it generated net cash of $170.1 million from operating activities, up 5.1% from the year-ago period. Capital invested for purchasing property, plant and equipment totaled $25.6 million, increasing 5.3% year over year. Non-GAAP free cash flow (adjusted) was $144.5 million versus $172.2 million in the year-ago period.
In the first three quarters of 2021, the company paid out dividends amounting to $13.1 million, down from $24.9 million distributed in the prior-year period.
A couple of days before the earnings release, it announced that its board of directors approved the payment of a quarterly dividend of 8 cents per share. The dividend payment for the fourth quarter will be made on Jan 4, 2022, to shareholders of record as of Dec 17, 2021.
Altra Industrial believes that a healthy industrial demand will be advantageous in the fourth quarter of 2021. However, supply-chain issues along with inflation, logistics, and labor problems are worrisome.
For 2021, the company decreased its financial projections. Sales are now projected to be $1,880-$1,900 million, higher than $1,890-$1,920 million mentioned earlier.
Non-GAAP earnings are expected to be $3.25-$3.35, down from the previously stated $3.30-$3.46. Also, non-GAAP adjusted EBITDA is likely to be $390-$400 million, down from $395-$405 million stated earlier. The tax rate is anticipated to be 20-22%.
Cash flow from operations is expected to be $240-$270 million in 2021 (versus $260-$290 million stated earlier), while capital expenditure is likely to be $40-$45 million, down from $50-$55 million mentioned previously. Free cash flow (non-GAAP) is predicted to be $200-$225 million, down from $210-$235 million mentioned earlier.
Altra Industrial Motion Corp. Price, Consensus and EPS Surprise
Altra Industrial Motion Corp. price-consensus-eps-surprise-chart | Altra Industrial Motion Corp. Quote
Zacks Rank & Stocks to Consider
With a market capitalization of $3.5 billion, Altra Industrial currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the industry are DXP Enterprises, Inc. DXPE, Nordson Corporation NDSN, and Kadant Inc. KAI. While both DXP Enterprises and Nordson currently sport a Zacks Rank #1 (Strong Buy), Kadant carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for the companies improved for the current year.
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Altra Industrial Motion Corp. (AIMC) : Free Stock Analysis Report
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