Zacks Investment Research upgraded Sun Hydraulics Corporation SNHY to a Zacks Rank #1 (Strong Buy) on Jan 3, 2017. Going by the Zacks model, companies sporting a Zacks Rank #1 have strong chances of outperforming the broader market.
Post the release of third-quarter 2016 results on Nov 7, Sun Hydraulics’ shares yielded return of 30.6%, significantly outperforming the return of 8.5% recorded by the Zacks categorized Machinery General Industrial industry.
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Why the Upgrade?
Market sentiments have been favoring Sun Hydraulics for quite some time now, especially after the company provided promising long-term and near-term outlook. For fourth quarter 2016, the company anticipates sales to be approximately $46 million, representing 4% growth over the year-ago quarter. In addition, the company aims to boost its sales on the back of superior customer relationships and meaningful business acquisitions as well as improve its margins through its strategic lean initiatives in the quarters ahead. By 2025, the company targets generating sales of approximately $1 billion.
In sync with its growth policies, Sun Hydraulics completed the acquisition of Power Controls and Vehicle Technologies business lines of Enovation Controls, LLC in Dec 2016. The acquired assets are anticipated to complement the company’s existing products used in mobile and industrial applications. Sun Hydraulics anticipates earnings accretion of roughly 25−35 cents per share in 2017 as well as annual $5 million profit synergies by 2020.
Also, the company believes in rewarding its shareholders handsomely through dividend payments. On Jan 15, 2017, it will distribute quarterly dividend of 9 cents per share to shareholders on record as of Dec 31, 2016.
Investors seem to be optimistic about Sun Hydraulics’ future prospects, as evident from upward revisions in earnings estimates for the stock. Over the last 60 days, the Zacks Consensus Estimate for the company increased 31.8% to $1.45 per share for 2017.
Other Stocks to Consider
Sun Hydraulics has a market capitalization of $1.1 billion. Other stocks worth considering in the machinery industry include Altra Industrial Motion Corporation AIMC, Broadwind Energy, Inc. BWEN and The Middleby Corporation MIDD. While Altra Industrial Motion sports a Zacks Rank #1, both Broadwind Energy and The Middleby Corporation carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Altra Industrial Motion Corporation reported better-than-expected results in the last four quarters, with an average positive earnings surprise of 8.06%. Also, bottom-line expectations for 2017 improved over the past 60 days.
Broadwind Energy, Inc.’s earnings estimates for 2017 have been revised upward over the last 60 days.
Middleby Corporation has witnessed positive revisions in earnings estimates for 2017 over the past 60 days. Also, the company has a positive average earnings surprise of 15.93% for the trailing four quarters.
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