Actuant (ATU) Misses On Q2 Earnings, Tops Revenue Estimates

Actuant Corporation (NYSE:ATU) reported mixed results for second-quarter fiscal 2018 (ended February 2018).

This Zacks Rank #3 (Hold) company reported higher-than-expected revenues in the quarter. However, margins were hurt due to the commercial, engineering and production expenses, as well as long-standing specialty projects.

Earnings and Revenues

Quarterly adjusted earnings came in at 13 cents per share, missing the Zacks Consensus Estimate by a penny. However, the bottom line came in 18.2% higher than the year-ago tally.

Net sales during the reported quarter came in at $275.2 million, outpacing the Zacks Consensus Estimate of $269 million. The top line also came in 6.3% higher than the prior-year tally. Core sales were up 3% year over year in the quarter.

Segmental Details

Revenues in the Industrial segment were up 8.1% year over year to $99.1 million. The upside primarily stemmed from sturdy sales of standard industrial tools across all end markets. Core sales of the segment increased 4% year over year.

Net sales of the Engineered Solutions segment jumped 16.7% year over year to $110.1 million. Continued sales growth from off-highway equipment markets as well as modest truck sales growth supported the uptick. Core sales of the segment were up 10% year over year.

However, the Energy segment revenues dipped 9.5% to $66 million in the quarter. Actaunt noted that headwinds rising from the Viking business spin-off and the Mirage buyout, as well as dismal Hydratight sales, resulted in the downside. Core sales of the segment were down 8% year over year.

Costs and Margins

Cost of products sold in the reported quarter came in at $185.5 million, higher than $171.5 million recorded in the year-ago quarter. Gross profit margin in the fiscal second quarter came in at 32.6%, contracting 110 basis points (bps) year over year.

Selling, administrative and engineering expenses totaled $68.5 million, higher than $67million incurred in the comparable quarter last fiscal. Quarterly operating margin shrunk160 bps to 3.5%.

Balance Sheet and Cash Flow

Exiting the fiscal second quarter, Actuant had cash and cash equivalents worth $153.6 million, lower than $229.6 million recorded at the end of fiscal 2017. Long-term debt totaled $517.3 million, down from $531.9 million recorded on Aug 31, 2017.

In the reported quarter, Actuant used cash worth $1.6 million from operating activities, as against the $2.2-million cash provided in the year-ago period. Capital expenditure came in at $4.6 million compared to $9.6 million registered in the year-earlier quarter.

Outlook

Actuant anticipates to report revenues within $300-$310 million and adjusted earnings per share (EPS) within 33-38 cents in the third-quarter fiscal 2018.

The company believes improving end-market conditions will continue to bolster its revenues in the upcoming quarters. Moreover, the company stated that favorable foreign currently translation impact will help drive its top-line performance. The company raised its sales outlook for fiscal 2018 from $1.10-$1.13 billion to $1.140-$1.160 billion (estimating core sales growth of 2-4%).

However, Actuant expects that the ongoing engineering and commercial investments, certain maintenance-related expenses, expedited freight, wage inflation and input cost upsurge will dent its near-term margins. Notably, the company lowered its fiscal 2018 EPS guidance to $1.00-$1.10 per share from the prior view of $1.05-$1.15 per share.

The company intends to improve its near-term operational performance on the back of the ongoing portfolio management and restructuring actions.

Stocks to Consider

Some better-ranked stocks in the Zacks Industrial Products sector are listed below:

Axon Enterprise, Inc (NASDAQ:AAXN) sports a Zacks Rank of 1 (Strong Buy). The company pulled off an outstanding positive average earnings surprise of 188.33% over the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Acco Brands Corporation (NYSE:ACCO) carries a Zacks Rank of 2 (Buy). The company witnessed an average positive earnings surprise of 82.49% over the preceding four quarters.

Applied Industrial Technologies, Inc. (NYSE:AIT) also holds a Zacks Rank of 2. The company recorded a positive average earnings surprise of 10.97% during the same time frame.

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