Sun Hydraulics Corporation SNHY reported in-line results for second-quarter 2015. The company’s earnings of 35 cents per share met the Zacks Consensus Estimate, while declining 24% from 46 cents earned in the year-ago quarter.
The year-over-year decline was primarily brought about by weak top-line performance and roughly 5 cents per share of adverse impact related to foreign currency movements.
Revenues
Sun Hydraulics’ net sales in the quarter were $54 million, down 12% from the year-ago tally of $61.1 million. However, the top line stood at par with the Zacks Consensus Estimate.
The year-over-year decline was led by weak performance in all operating regions. Sales in the Americas declined 14%, while European and Asian sales were down roughly 13% and 2%, respectively. Also, adverse foreign currency movements impacted revenues by $1.8 million. However, consistent marketing initiatives in China led to a 9% increase in sales.
Margins
Cost of sales declined 7.6% year over year, representing 60.4% of net sales as against 57.8% in the year-ago quarter. Gross margin decreased 260 basis points (bps) to 39.6%. Selling, engineering and administrative (SG&A) expenses, as a percentage of revenues, were 13.6% versus 12.1% recorded in the year-ago quarter.
Operating income declined 23.4% year over year to $14.1 million; while margin came in at 26.1% compared with 30.1% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting second-quarter 2015, Sun Hydraulics had cash and cash equivalents of $71.7 million, up from $62.4 million in the preceding quarter.
In first-half 2015, Sun Hydraulics generated cash of $28.5 million, up from $26.7 million in the year-ago comparable period. Capital expenditure dropped to $3.1 million from $5.1 million in the first half of 2014.
During the period, Sun Hydraulics paid dividends of approximately $7.2 million to its shareholders.
Outlook: Sun Hydraulics anticipates revenues to be roughly $50 million for third-quarter 2015, down 8% year over year. Earnings are expected within 32−34 cents per share, lower than 37 cents earned in the year-ago quarter.
Unfavorable foreign currency movements will likely impact revenues by $1.9 million and earnings by 4 cents per share. Also, the earnings guidance includes 4 cents per share of one-time gain related to disposal of a building in South Korea.
With a market capitalization of $927 million, Sun Hydraulics currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Middleby Corp. MIDD, Nordson Corporation NDSN and RBC Bearings Inc. ROLL While Middleby sports a Zacks Rank #1 (Strong Buy), both Nordson Corporation and RBC Bearings carry a Zacks Rank #2 (Buy).
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