Atlas Copco Poised to Benefit From Demand Growth, Buyouts
Atlas Copco AB’s ATLKY anticipation of healthy product and services demand from various end markets as well as its inorganic growth strategies make it a solid bet for investors now.
It currently boasts a Zacks Rank #1 (Strong Buy).
Year to date, the company’s American Depository Receipts have yielded 18.7% return, outperforming 11% gain recorded by the industry it belongs to.
Why the Upgrade?
Altas Copco’s financial performance in second-quarter 2017 was impressive, with revenues increasing 18% year over year on the back of healthy demand for products and services. Orders improved for industrial compressors, industrial assembly tools and solutions and portable compressors. Also, orders for vacuum equipment, mining equipment and that for infrastructure projects strengthened. Operating profit grew 26% while net earnings expanded 28%.
In the near term, Altas Copco anticipates demand for its products and services to remain high. We believe that expansion in mining activities, strengthening auto and semiconductor industries, growth in infrastructure projects and higher industrial activities might drive demand growth.
Additionally, synergistic benefits from acquired assets will improve profitability in the quarters ahead. The recently acquired assets of U.S.-based compressor distributor, Glauber Equipment Corporation will strengthen the company’s Compressor Technique businesses. Also, the buyout of 34% share in Sweden-based Mobilaris MCE (in July) has added advanced software used for underground mining and other related purposes to its portfolio. The trajectory does not end here. In June, the company acquired 45% stake in CSKT Inc. The company, in 2016, had bought roughly 55% stake in this Taiwanese joint venture. Notably, the acquired assets added 6% to sales growth in second-quarter 2017.
Investors seem to be optimistic about Atlas Copco’s future prospects, as evident from the positive revisions in earnings estimates for the stock. Over the last 60 days, the Zacks Consensus Estimate for the company increased 3.6% to $1.72 for 2017 and 4.5% to $1.86 for 2018.
Atlas Copco AB Price and Consensus
Atlas Copco AB Price and Consensus | Atlas Copco AB Quote
Other Stocks to Consider
Atlas Copco has a market capitalization of approximately $42.3 billion. Other stocks worth considering in the industry include Altra Industrial Motion Corporation AIMC, Kadant Inc. KAI and Applied Industrial Technologies, Inc. AIT. While both Altra Industrial Motion and Kadant sport a Zacks Rank #1, Applied Industrial Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Altra Industrial Motion’s financial performance was impressive in the last four quarters, with an average positive earnings surprise of 16.95%. Also, earnings estimates for 2017 and 2018 were revised upward over the last 60 days.
Kadant pulled off an average positive earnings surprise of 19.29% in the trailing four quarters. Also, earnings expectations for 2017 and 2018 improved over the past 60 days.
Applied Industrial Technologies’ financial performance was impressive, with an average positive earnings surprise of 10.10% for the last four quarters. Also, earnings estimates for fiscal 2018 and fiscal 2019 were revised upward over the last 60 days.
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