Actuant Corporation (NYSE:) can currently be considered a smart choice for investors seeking exposure in the machinery space. It boasts solid prospects, evident from a positive revision in earnings estimates, and also has strong fundamentals.
This Menomonee Falls, WI-based company currently has a Zacks Rank #2 (Buy). It belongs to the Zacks Manufacturing – Tools & Related Products industry, falling under the broader Zacks Industrial Products sector.
The industry is currently placed in the top 50% of more than 250 Zacks industries. Notably, the top 50% of the Zacks-ranked industries tends to outperform the bottom 50% by a factor of more than 2 to 1.
Below we discuss why it is worth investing in Actuant.
Healthy Performance and Solid Prospects: The company’s earnings surpassed estimates in all the last four quarters, with a positive earnings surprise of 18.57%, on average. In first-quarter fiscal 2020 results (ended Nov 30, 2019), its earnings of 12 cents per share exceeded the Zacks Consensus Estimate by 33.33%.
We believe that impressive financial results boosted investors’ sentiments for the stock. Notably, the company’s shares have gained 21.3% in the past three months whereas the industry has grown 18.6%.
Actuant anticipates that its cost-saving actions, robust product brands and focus on growth initiatives will be beneficial in fiscal 2020 (ending August 2020). Also, exit from certain product lines (low-margin) in the first quarter will be a boon. Adjusted earnings are predicted to be 68-81 cents per share in the year, indicating a wider expectation from 73 cents recorded in fiscal 2019 (ended August 2019).
Currently, the Zacks Consensus Estimate for Actuant’s earnings is pegged at 74 cents per share for fiscal 2020 and $1.05 for fiscal 2021 (ending August 2021). The consensus mark for fiscal 2020 has been flat with the 30-day ago figure while that for fiscal 2021 moves 1% north.
Actuant Corporation Price and Consensus
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Actuant Corporation price-consensus-chart | Actuant Corporation Quote
Top-Line Growth Potential: Actuant is focused on enhancing its product portfolio. Notably, it introduced three products in the first quarter of fiscal 2020 while having offered seven new products in the fourth quarter of fiscal 2019.
Also, the company anticipates gaining traction from disposing its non-profitable businesses and focusing on growth initiatives. Notably, it became a pure-play industrial tool and services provider after divesting its Engineered Components & Systems segment in October 2019. This move will help add shareholder value. Moreover, a healthy medical business, represented under Cortland, will be a key catalyst in fiscal 2020.
Restructuring Efforts: Actuant’s endeavors to improve operational efficiency, lower costs and consolidate facilities have been benefiting over time. In March 2019, the company announced new measures to realign its Industrial Tools & Services segment. With plans drafted for fiscal 2020, these restructuring moves can yield annualized savings of $12-$15 million.
Also, the company believes that consolidation of the Cortland plant during fiscal 2020 will likely yield savings (net of charges) worth $3 million.
Sound Capital-Allocation Policy: Actuant effectively deploys its resources to execute acquisitions, dividend payouts, share buybacks, debt repayments and growth investments. All these are directed toward boosting shareholder value.
Notably, the company utilized $2.4 million for paying out dividends, $17.8 million for repurchasing shares and $175 million for paying down long-term debts in the first quarter of fiscal 2020.
Other Key Picks
Some other top-ranked stocks in the sector are Hickok Inc (OTC:) , Cintas Corporation (NASDAQ:) and DXP Enterprises, Inc (NASDAQ:) . While Hickok and DXP Enterprises currently sport a Zacks Rank #1 (Strong Buy), Cintas carries the same top Zacks Rank as Actuant. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for these stocks have improved for the current year. Further, a positive earnings surprise for the last reported quarter was 15.56% for Hickok, 11.27% for Cintas and 16.39% for DXP Enterprises.
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