Altra Industrial (AIMC) Q1 Earnings Beat, 2022 View Solid
Altra Industrial Motion Corp. AIMC reported impressive results for first-quarter 2022. AIMC’s earnings beat the Zacks Consensus Estimate by 28.2% while its sales surpassed the same by 4.2%.
Non-GAAP earnings in the quarter under review were 91 cents per share, beating the Zacks Consensus Estimate of 71 cents. The bottom line increased 5.8% from the year-ago figure of 86 cents, driven by investments in inventory and higher sales.
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In the past three months, the stock has declined 10.1% compared with the industry’s fall of 21.1%
Revenue Details
In the reported quarter, Altra Industrial’s revenues were $512 million, reflecting an increase of 8.4% from the year-ago number. Organic sales in the reported quarter expanded 7.9%, driven by healthy end-market businesses, including factory automation, specialty machinery, turf & garden, agriculture, construction and material handling. Foreign currency translation left a negative impact of 1.8%.
Also, Altra Industrial’s revenues surpassed the Zacks Consensus Estimate of $491 million.
On a geographical basis, AIMC’s organic sales expanded 13.4% year over year in North America and increased 17.7% in Europe. However, sales in the Asia Pacific/Rest of World decreased 18.3%.
Altra Industrial reports revenues under two heads, namely Automation & Specialty and Power Transmission Technologies. A brief snapshot of the segmental sales is provided below:
Revenues generated from Power Transmission Technologies amounted to $253.7 million, increasing 14.8% year over year. Organic sales in the quarter expanded 17.1% year over year.
Automation & Specialty’s sales were $259.2 million in the first quarter, up 2.8% from the year-ago reported quarter. Organic sales decreased 0.2% from the year-ago quarter’s level.
Altra Industrial Motion Corp. Price, Consensus and EPS Surprise
Altra Industrial Motion Corp. price-consensus-eps-surprise-chart | Altra Industrial Motion Corp. Quote
Margin Profile
In the reported quarter, Altra Industrial’s cost of sales increased 10.3% year over year to $331.4 million. Notably, the cost of sales represented 64.8% of net sales. Non-GAAP gross profit was $181.5 million, up 5.7% year over year. The gross margin (non-GAAP) decreased 90 basis points (bps) year over year to 35.5%.
Selling, general and administrative expenses (non-GAAP) increased 2.6% year over year to $73.8 million and represented 14.4% of net sales. Research and development expenses (non-GAAP) were $17.6 million compared with $15.9 million in the year-ago quarter.
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $103.1 million, the margin being 20.1%. The non-GAAP operating income in the reported quarter decreased 7.4% year over year to $90.1 million, with the non-GAAP operating margin decreasing 20 bps to 17.6 %.
Altra Industrial suffered the adverse impacts of inflation, labor shortages and supply-chain headwinds.
Net interest expenses totaled $11.3 million in the reported quarter, reflecting a decrease from $16.9 million in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the first quarter of 2022, Altra Industrial’s cash and cash equivalents were $183.7 million, decreasing 25.4% from $256.8 million recorded in the last reported quarter. Long-term debt was $1,390.7 million, reflecting a 0.7% decrease from $1,401 million in the last reported quarter.
In the first three months of 2022, AIMC repaid $2.5 million of borrowings under its term-loan facility and $5 million under the revolving credit facility. Altra Industrial didn’t borrow any amount from the term-loan facility and the revolving credit facility in the reported quarter.
In the first three months, AIMC used net cash of $24.9 million from operating activities compared with $36.2 million generated in the year-ago period. Capital invested in purchasing property, plant and equipment totaled $17.8 million, increasing 85.4% year over year. Non-GAAP free cash outflow (adjusted) was $42.7 million against $26.6 million cash inflow in the previous year’s quarter.
In the first three months, Altra Industrial paid out dividends amounting to $5.2 million, up from $3.9 million distributed in the year-ago quarter.
Two days ago, AIMC’s board of directors approved the payment of a quarterly cash dividend of 9 cents per share to its shareholders of record as of Jun 17, 2022. The disbursement will be made on Jul 6.
On the same day, Altra Industrial also announced that its board of directors approved a share repurchase program. With this, AIMC aims to repurchase shares of about $300 million by Dec 24, 2024.
Outlook
Altra Industrial believes that healthy demand, effective pricing and synergies from buyouts will be beneficial in the quarter ahead. However, supply-chain issues, along with inflation and labor problems, are concerning for the second quarter of 2022.
For 2022, AIMC anticipates sales of 1,900.5-$1,940.5 million. Organic sales growth is predicted to be 3-5%.
Non-GAAP earnings are expected to be $3.35-$3.50 and non-GAAP adjusted EBITDA is likely to be $388-$403 million. The tax rate is anticipated to be 21-23%.
Capital expenditure is likely to be $50-$55 million. Free cash flow (non-GAAP) is predicted to be $125-$140 million.
Zacks Rank & Stocks to Consider
With a market capitalization of $2.5 billion, AIMC currently carries a Zacks Rank #4 (Hold).
Some better-ranked companies from the industrial products sector are discussed below.
Roper Technologies, Inc. ROP presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 60 days, ROP’s earnings estimates have increased 0.8% for 2022. The stock has increased 1.9% in the past three months.
Donaldson Company, Inc. DCI presently carries a Zacks Rank of 2. DCI delivered a trailing four-quarter earnings surprise of 4.2%, on average.
DCI’s earnings estimates have increased 0.7% for fiscal 2022 (ending July 2022) in the past 60 days. Its shares have decreased 10.5% in the past three months.
Ferguson plc FERG is presently Zacks #2 Ranked. FERG’s earnings surprise in the last four quarters was 14.2%, on average.
In the past 60 days, the stock’s earnings estimates have increased 6.5% for fiscal 2022 (ending July 2022). The same has declined 20.9% in the past three months.
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