Actuant (ATU) Beats Q4 Earnings By A Penny, Stock Up 3.3%

Diversified machinery company, Actuant Corporation (NYSE:ATU) reported adjusted earnings of 30 cents per share in fourth-quarter fiscal 2016 (ended Aug 31, 2016). Earnings were down 18.9% year over year. However, the bottom line exceeded the Zacks Consensus Estimate by a penny.

Adjusted earnings for fiscal 2016 were $1.22 per share against $1.65 reported in the previous year.

Revenues

Actuant’s fiscal fourth-quarter net revenue of $275.8 million declined 8.2% year over year and also fell short of the Zacks Consensus Estimate of $278 million. The company claimed that conclusion of some major energy projects and further customer destocking activities (conducted within the Engineered Solutions domain) affected the quarterly core sales results (down 11% year over year). In addition, adverse foreign currency movements impacted sales by 1% while acquisition and divestitures added 4%.

Net revenue for fiscal 2016 was $1149.4 million compared to $1249.3 million reported in the previous year.

Costs and Margins

The company’s cost of sales was $179.5 million in the quarter, down 7.4% year over year.

Gross margin contracted 60 basis points (bps) to 34.9%. The decline was witnessed due to lower sales volumes, weaker production as well as absorption volumes and unfavorable business mix.

Selling, administrative and engineering expenses were $64.3 million, down from $71.8 million recorded in fourth-quarter fiscal 2015.

For the quarter, the company reported adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $38 million. The figure was down from the year-ago tally of $41.2 million.

Balance Sheet and Cash Flow

Actuant exited the fiscal fourth quarter with cash and cash equivalents of $179.6 million, up from $168.8 million as of Aug 31, 2015. Long-term debt was $565.6 million, down from $584.3 million at the end of fiscal 2015.

In the quarter, Actuant generated cash worth $42.7 million from its operating activities as against $87.8 million a year ago. Capital spending totaled $4.6 million, down from $5.3 million in fourth-quarter fiscal 2015.

During the quarter, Actuant repurchased 0.1 million common shares for $3 million.

Segmental Performance

Revenues from the Industrial segment fell 6% year over year to $94 million. The decline was due to poor demand from conventional industrial niche markets and unfavorable currency translation.

Energy Segment revenues decreased 9.3% year over year to $91.4 million. Revenues were affected by the appreciation of the U.S. dollar and weak upstream capital expenditure made by companies engaged in drilling, field development and exploration.

Revenues from the Engineered Solution Segment decreased 9.2% year over year to $90.3 million. The year-over-year decline was experienced due to destocking initiatives conducted by the agricultural and off-highway original equipment manufacturers.

Outlook

Actuant believes that the dismal demand environment would continue to hurt its revenues in the quarters ahead. The company realizes that the weak end market conditions are not likely to improve in the upcoming fiscal year.

However, the company intends to boost its business on the back of strategic cost-saving initiatives and new growth-oriented investments. Actuant’s ongoing restructuring actions and accelerating lean production efforts are estimated to be conducive to growth in the near term.

The company anticipates generating earnings per share (‘EPS’) within the range of 14-19 cents and revenues within $260-270 million in first-quarter fiscal 2017, including core sales decline of 14−16%. It projects to generate EPS within the range of $1.00-1.20 per share and revenues within $1.075-1.125 billion for fiscal 2017. Core sales are estimated to fall in the range of 2−6%. Whole-year free cash flow is predicted to be within the range of $85-$95 million.

Zacks Rank and Share Price

Actaunt currently carries a Zacks Rank #3 (Hold). Over the last 60 days, the Zacks Consensus Estimate for the stock was pegged at $1.21 per share for fiscal 2016 and $1.22 per share for fiscal 2017.

ACTUANT CORP Price, Consensus and EPS Surprise

The stock gained 3.3% to settle at $22.85 a share on Sep 28, 2016.

Stocks to Consider

Some better-ranked stocks in the industry that warrant a look are listed below:

Brady Corp. (NYSE:BRC) currently sports a Zacks Rank #1 (Strong Buy). The company has a positive average earnings surprise of 31.49% over the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alarm.Com Holdings, Inc. (NASDAQ:ALRM) and Stanley Black & Decker, Inc. (NYSE:SWK) carry a Zacks Rank #2 (Buy).

While Alarm.Com Holdings generated a positive average earnings surprise of 450.56% over the trailing four quarters, Stanley Black & Decker reported a positive average earnings surprise of 6.12% in the trailing four quarters.

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