Altra Industrial Motion Corp. AIMC has been grappling with persistent supply-chain constraints, raw material cost inflation and foreign-currency headwinds for a while. These factors are likely to adversely impact its earnings in the near term.
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The currently Zacks Rank #4 (Sell) player has a market capitalization of $2.8 billion. In the past six months, the stock has lost 4.4% compared with the industry’s decline of 0.9%.
Let’s discuss the factors that might continue taking a toll on the firm.
High Costs and Expenses: AlMC is experiencing the adverse impacts of escalating costs and operating expenses. Altra industrial’s cost of sales grew 3.9%, while research and development expenses increased 2.9% in the second quarter of 2022. The operating margin (adjusted) in the quarter decreased 60 basis points (bps) on a year-over-year basis. Supply-chain headwinds, labor shortages and inflation hurt performance in the second quarter. Supply-chain issues and inflation related to raw materials, logistics and labor costs are expected to persist in the coming quarters.
Escalated Debt Burden: AIMC’s highly leveraged balance sheet is concerning. Altra Industrial’s long-term debt remained high at $1,070 million while exiting the second quarter of 2022. Its cash and cash equivalents of $129.9 million seem unimpressive considering its heavy debt load. Also, while exiting the June quarter, AIMC had only $710.9 million available under its revolving credit facility.
Forex Woes: AIMC’s performance is exposed to risks arising from geopolitical tensions, trade relations, adverse movements in foreign currencies and governmental policies, given its widespread international presence. Forex woes hampered Altra Industrial’s sales 3.7% on a year-over-year basis in the second quarter of 2022. In the quarters ahead, AIMC’s overseas business might be depressed by a stronger U.S. dollar.
Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for 2022 earnings has been revised 0.9% downward.
Zacks Rank & Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below:
Applied Industrial Technologies, Inc. AIT presently sports a Zacks Rank #1 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 22.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
AIT’s earnings estimates have increased 5.8% for fiscal 2023 (ending June 2023) in the past 60 days. Its shares have rallied 17.3% in the past six months.
Greif, Inc. GEF presently has a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average.
GEF’s earnings estimates have increased 0.4% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 20.1% in the past six months.
Valmont Industries, Inc. VMI presently has a Zacks Rank of 2. VMI’s earnings surprise in the last four quarters was 13.7%, on average.
In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 33.6% in the past six months.
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