Enerpac Tool Group Corp. EPAC has impressed investors with its recent momentum driven by its investments in growth opportunities, product innovation and acquisitions.
In the past month, shares of this Zacks Rank #2 (Buy) company have gained 0.3% against a decline of 4.2% recorded by the industry it belongs to.
What Makes Enerpac an Attractive Option?
Enerpac is well positioned to benefit from its focus on product development. Notably, the company introduced seven products in fourth-quarter fiscal 2019 (ended Aug 31, 2019) and three in the first quarter of fiscal 2020 (ended Nov 30, 2019). Also, the company is likely to benefit from its focus on growth initiatives and exit from non-profitable businesses. In fiscal 2020 (ending Aug 31, 2020), its medical business, represented under Cortland, is likely to flourish, with core sales growth anticipated to be 10-15%.
Also, Enerpac has been benefiting from its measures to cut costs, improve operational efficiency and consolidate facilities. In March 2019, it announced restructuring measures, including the integration of Hydratight and Enerpac businesses, discontinuation of some commodity type services in North America, and improving corporate structure related to its Industrial Tools & Services segment. Majority of these actions are predicted to be completed in fiscal 2020. The company expects these to yield annualized savings of $12-$15 million.
In addition, its sound capital allocation strategy allows it to utilize resources for repaying debts, investments, acquisitions, and rewarding shareholders through dividend payouts and share buybacks. Notably, in the first quarter of fiscal 2020, Enerpac used $17.8 million for purchasing 0.84 million shares while distributed dividends worth $2.4 million. Also, it repaid $175 million long-term debts in the quarter, with its financial leverage improving to 0.8x from the year-ago figure of 2.1x. Further, benefits from acquired assets, expansionary efforts, market share gains, and commercial efficiency are likely to beneficial for its top line in long-run.
However, for fiscal 2020, the company remains concerned about risks arising from uncertainties in its end markets. Notably, sales for the year are predicted to be $575-$600 million, down from $655 million recorded in fiscal 2019 (ended Aug 31, 2019). Also, the adverse impact of foreign currency translation poses a concern, which affected its first-quarter fiscal 2020 revenues by 1%.
Other Key Picks
Some other top-ranked stocks from the Zacks Industrial Products sector are Graco Inc. GGG, Dover Corporation DOV and Nordson Corporation NDSN. While Graco sports a Zacks Rank #1 (Strong Buy), Dover and Nordson carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Graco delivered earnings surprise of 0.40%, on average, in the trailing four quarters.
Dover pulled off positive earnings surprise of 5.36%, on average, in the trailing four quarters.
Nordson’s earnings surprise in the last reported quarter was 1.13%.
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