Machinery company Actuant Corporation (ATU) reported lower-than-expected results for fourth-quarter fiscal 2014 (ended Aug 31, 2014). Investor’s sentiments were weak on the stock, with the shares declining 1.6% since Oct 2.
Adjusted earnings, before special items, came in at 47 cents per share, down 32.9% sequentially and 9.6% from the Zacks Consensus Estimate of 52 cents. However, the bottom line came above 46 cents earned in the year-ago quarter.
For fiscal 2014, Actuant’s adjusted earnings were $1.91 per share, up 3.8% from $1.84 recorded in fiscal 2013.
Revenues
Actuant generated net revenues of $354.3 million, increasing 8.3% year over year but slightly below the Zacks Consensus Estimate of $356 million. Core sales declined 1%, while acquisitions and foreign currency translation added 7% and 2% to sales growth respectively.
For fiscal 2014, the company’s net revenue totaled $1,399.9 million, up 9.4% year over year.
Cost & Margins
Actuant’s cost of sales increased 7.3% year over year, representing 59.9% of net revenue versus 60.4% in the year-ago quarter. Gross margin increased 50 basis points (bps) to 40.1%. Selling, administrative and engineering expenses stood at $87.4 million compared with $71.3 million in the year-ago quarter.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were down 3.3% year over year to $61 million.
Actuant's Segment Performance
Revenues from the Industrial segment edged up 0.6% year over year to $111.9 million. Core sales decreased 7% due to globally lower integration solutions activity and flat demand for Enerpac’s industrial tool product line. Nevertheless, the core sales decline was offset by 7% contribution from acquisitions and 1% positive impact from foreign currency translation. The segment’s operating profit margin was 29.3%, up 60 bps year over year.
Energy segment’s revenues grew 32.9% year over year to $123.2 million. The increase was attributable to 23% gain from acquisitions, 5% hike in core sales and 5% positive foreign currency translation impact. The segment’s operating profit margin was 14.7%, down 520 bps year over year.
The Engineered Solution segment’s revenues decreased 3.3% year over year to $119.3 million. Core sales climbed 1% while foreign currency translation added 1%. These were, however, more than offset by a 5% negative impact from divestiture. The segment’s operating profit margin was 4.7% versus 9.5% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting fourth quarter, Actuant had cash and cash equivalents of $109 million, down 15.9% from $129.6 million in the previous quarter. Long-term debt stood at $385.5 million, slightly below $386.6 million at the end of third-quarter.
Actuant generated cash of $52 million from its operating activities, down 32.9% year over year. Capital spending amounted to $8 million versus $4.98 million expended in the year-ago quarter.
During the quarter, Actuant repurchased approximately three million shares for $100 million, while nearly 1.8 million shares have been bought back since end of fiscal 2014. The company also announced its board of director’s approval for a new buyback program of seven million shares.
Outlook: For first-quarter fiscal 2015, Actuant expects sales in the range of $335−$345 million. Earnings are projected within 40−45 cents per share.
For fiscal 2015, sales are expected in $1.425−$1.475 billion range, including modest currency headwinds. Core sales are estimated to grow within 3−5%. Earnings are predicted in a range of $2.05−$2.15 per share. Free cash flow will come within $160−$170 million while shares outstanding will be 66−67 million.
With a market capitalization of $2.1 billion, Actuant currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the machinery industry include Blount International Inc. (BLT), Kennametal Inc. (KMT) and Nordson Corporation (NDSN). While Blount International sports a Zacks Rank #1 (Strong Buy), both Kennametal and Nordson hold a Zacks Rank #2 (Buy).
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