Zacks Investment Research downgraded Actuant Corporation (ATU) to a Zacks Rank #5 (Strong Sell) on Oct 7, 2014. Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market.
Why the Downgrade?
Actuant Corporation’s lower-than-expected results for fourth-quarter fiscal 2014 (ended Aug 31, 2014) have weakened investor’s sentiments on the stock. As a result, the share price has declined 2.5% since the earnings release on Oct 2. A brief discussion on the quarter’s results is provided below:
Earnings came in at 47 cents per share, below the Zacks Consensus Estimate of 52 cents and down 32.9% sequentially. Revenues increased 8.3% on the back of acquisitions and foreign currency translation gains. Core sales inched down 1% primarily due to uneven demand in end markets and unfavorable segment mix. Industrial segment suffered from weak integration solutions activity and flat demand for Enerpac’s industrial tool product line. Cost of sales and operating expenses increased 7.3% and 22.6% respectively.
For fiscal 2015, Actuant anticipates headwinds of 8 cents and 5 cents per share from higher tax rate and foreign currency translation respectively.
Investors are presently dubious about Actuant’s future performance in the quarters ahead, reflecting the uncertainty through a downward revision in earnings estimates. Over the last 7 days, the Zacks Consensus Estimate has decreased 12.2% to 3 cents per share for first-quarter fiscal 2015, 6.7% to $2.09 for fiscal 2015 and 5.3% to $2.31 for fiscal 2016.
Other Stocks to Consider
Actuant Corporation currently has a $2 billion market capitalization. Some better-ranked stocks in the machinery industry include The Middleby Corporation (MIDD), A BB Ltd. (ABB) and Nordson Corporation (NDSN). All these stocks carry a Zacks Rank #2 (Buy).
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