On Mar 22, 2016, we issued an updated research report on premium industrial goods company Altra Industrial Motion Corp. AIMC. The company is one of the leading manufacturers and distributors of a diversified range of mechanical power transmission, or MPT components. Its product line includes clutches & brakes, couplings, and gearing & power transmission components.
Bearish Factors
Difficult operating conditions in the global industrial market are currently weighing on Altra Industrial’s top line. If not resolved promptly, Altra Industrial’s rising debt burden and high cost of sales may hurt its margins in the quarters ahead.
Appreciation of the U.S. dollar has made the company’s products more expensive and less competitive in the international markets. In fourth-quarter 2015, foreign exchange losses depressed the company’s revenue growth by 3.8%. Apart from currency issues, greater business internationalization exposes the company to other types of geo-political, legal, social or environmental risks.
Altra Industrial conducts trade in a highly competitive market. Sun Hydraulics Corp. SNHY, Nordson Corporation NDSN and Applied Industrial Technologies, Inc. AIT are some of its major rivals. Industry rivalry exposes Altra Industrial to risks of market share loss.
Considering the above-mentioned issues, the company predicts full-year 2016 revenues within the range of $700–$720 million, below $747 million generated in 2015. Earnings per share are projected within $1.40–$1.50, lower than $1.64 earned in 2015.
A Few Avenues
Though we remain apprehensive about the negatives weighing on this company’s results in the near term, we expect certain favorable developments to partially offset the adversities. For instance, through greater product portfolio diversification, operational efficiency and strategic restructuring programs, Altra Industrial aims to boost its top and bottom lines in the quarters ahead. Also, meaningful consolidations and accretive acquisitions will remain the company's preferred ways for enhancing profitability in the near future.
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