On May 30, we issued an updated research report on Actuant Corporation ATU. This premium diversified industrial behemoth provides highly engineered motion control solutions, premium hydraulic solutions and tools in more than 30 countries. Moreover, the company provides specialized services and products in the global energy market.
Actuant currently carries a Zacks Rank #3 (Hold) and flaunts a VGM Score of A.
Factors Benefiting the Stock
Higher Engineered Solutions and Industrial segments’ revenues have been bolstering Actuant’s top line. Elevated demand from industrial and off-highway equipment markets will likely drive the company’s revenue growth in the quarters ahead. Based on this, the company currently anticipates to generate revenues of $1.140-$1.160 billion in fiscal 2018 (ending August 2018), higher than the previous forecast of $1.10-$1.13 billion.
Moreover, Actuant intends to become a high-performing company on the back of stronger innovation, strategic portfolio-management moves and diligent restructuring initiatives. For instance, expansion of the Enerpac product line is expected to boost the company’s near-term revenues. On the other hand, the ongoing restructuring actions undertaken to drive customer spending activity in the company’s European end-markets will likely prove beneficial.
The company also intends to reinforce its business on the back of strategic acquisitions. For instance, in December 2017, Actuant acquired Mirage Machines, Ltd. from Acteon to broaden its product offerings in the flange facing and hot tapping categories. Specifically, this buyout will complement Actuant’s Energy segment's Hydratight business, and create rental and service business opportunities, going forward.
Over the past three months, Actuant’s shares have gained 9.8%, as against the 2.3% loss recorded by the industry.
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Prevalent Setbacks
Actuant’s profitability has been tumbling for the past few quarters. In addition, escalating costs have been pulling down the company’s margins. In the fiscal second quarter, its adjusted gross margin and operating margin contracted 110 and 160 basis points, respectively, year over year. The company noted that costs associated with the ongoing heavy lifting projects, warranty issues, negative sales mix and inflation in certain input prices resulted in the downtrend.
Furthermore, Actuant believes expedited freight, certain maintenance-related expenses, persistent inflation, as well as the engineering and commercial investments will dampen its near-term margins as well.
Actaunt also expects that sustained customer-maintenance deferrals, scope reductions and push-outs from various end-markets will affect its Energy business. In the fiscal second quarter, the segment’s core sales slipped 8% year over year. This primarily resulted from lower revenues secured from its Hydratight business.
The company anticipates to report earnings of $1.00-$1.10 per share for fiscal 2018 (ending August 2018), lower than the previous view of $1.05-$1.15 per share.
Stocks to Consider
Some better-ranked stocks in the Zacks Industrial Products sector are listed below:
Axon Enterprise, Inc AAXN flaunts a Zacks Rank #1 (Strong Buy). The company pulled off an average positive earnings surprise of 330%, over the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Acco Brands Corporation ACCO holds a Zacks Rank of 2 (Buy). The company delivered an average positive earnings surprise of 11.06%, in the preceding four quarters.
Avery Dennison Corporation AVY carries a Zacks Rank #2. The company came up with an average positive earnings surprise of 7.02%, during the same time frame.
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