Machinery company Actuant Corporation (ATU) reported adjusted earnings per share from continuing operations of 70 cents in fiscal third-quarter 2014 (ended May 31, 2014), up 12.9% year over year. The earnings also beat the Zacks Consensus Estimate of 62 cents.
Revenues
Actuant’s net sales in fiscal third-quarter were $378.2 million, up 9.9% year over year. Core sales grew 3% year over year and acquisitions added 5.0% to the overall tally. Moreover, revenues got a 2% boost from foreign currency translation. Also, revenues beat the Zacks Consensus Estimate of $375.0 million.
Cost & Margins
Actuant’s gross profit margin decreased 50 basis points (bps) year over year to 39.3% primarily due to higher cost of sales incurred during the quarter. Selling, administrative and engineering expenses were $83.5 million compared with $74.3 million in the year-ago quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased from $67.5 million in the year-ago quarter to $73.1 million in the quarter.
Actuant's Segment Performance
The Industrial segment revenues were down 1% year over year to $109.8 million. Core sales decreased 2% due to lower integration solutions activity globally. Also, Enerpac’s industrial tool product line sales dropped during the quarter. These declines were partially offset by a rise in the North American sales. The segment’s operating profit margin was 31.1%, up 200 bps year over year, resulting from effective cost management.
Energy segment’s revenues increased 26% year over year to $125.2 million. The increase was attributable to a 19% gain from acquisitions and 5% hike in core sales, which was complemented by 2% positive currency translation impact. The segment’s operating profit margin was 15.9%, down 400 bps year over year.
The Engineered Solution segment’s revenues increased 7% year over year to $143.1 million. The improvement was due to 5% core sales growth, aided by 2% favorable impact from foreign currency translation. The segment’s operating profit margin was 9.5%, flat year over year.
Balance Sheet/Cash Flow
Exiting the quarter, Actuant had cash and cash equivalents of $129.6 million, down from $155.0 million in the previous quarter. Long-term debt was roughly flat at $386.6 million.
Actuant generated $36.3 million cash from operating activities compared with $75.9 million generated in the year-ago quarter. Total capital spending in the reported quarter was about $11.6 million versus $7.2 million in the prior-year quarter.
During the quarter, Actuant repurchased 2.2 million shares worth $74 million. Also, the company divested the recreational vehicle business for a consideration of $35 million. Previously part of Engineered Solutions segment, the recreational vehicle business generated annual revenues of roughly $30 million.
Moreover, the company acquired Hayes Industries for $31 million.
Outlook: Based on the acquisitions and divestitures, the company forecasts a reduction in the previously expected range. For fiscal 2014, Actuant now expects earnings per share in the range of $1.92 to $1.97 compared with the previous guided range of $2.00 to $2.10. Fiscal revenue guidance has been lowered to $1.4 billion from the $1.41 to $1.45 billion range. In fiscal 2014, free cash flow is anticipated in the range of $175 to $185 million.
For the fourth quarter of fiscal 2014, Actuant anticipates revenues in the range of $350.0 to $360.0 million. Earnings per share are expected within the 48 to 53 cents range.
Actuant currently has a market capitalization of $2.6 billion and carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth a watch in the machinery industry include Gorman-Rupp Co. (GRC), Blount International Inc. (BLT) and Dover Corporation (DOV). While Gorman-Rupp sports a Zacks Rank #1 (Strong Buy), Blount International and Dover Corp. hold a Zacks Rank #2 (Buy).
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