On Jan 3, 2014, we maintained our recommendation on
) at Neutral. Despite an increase in sales, reduction in margins
is a matter of concern and thus largely led to our Neutral
Why the Reiteration?
With a market capitalization of $2.7 billion, Actuant is
involved in the designing, manufacturing and distribution of
various industrial products and systems for its clients in more
than 30 countries. With the acquisition spree undertaken by the
company, we expect higher revenues in the upcoming quarters.
Along with this, Actuant is also experiencing rise in core
The company's initiatives to enhance shareholders' value also
impress us. Actuant has been repurchasing shares in the past
quarters and is expected to continue doing so in the quarters
However, international presence also increases the company's
exposure to foreign currency risks, various environmental and
economical laws as well as cultural diversity. This may lead to
severe operational disruptions for the company.
Additionally, to survive in this highly competitive market,
Actuant needs to keep inventing products and technologies. This
involves a huge research and development expenditure which may
prove to be futile if customers are not convinced. This also
reduces the company's price control over its products, which may
result in the loss of market share, fall in sales and operating
A glimpse of the fiscal first-quarter 2014 financial results
clearly depicts mixed company performance in the quarter.
Actuant's adjusted earnings per share were 44 cents in the
quarter, down from the Zacks Consensus Estimate of 46 cents.
Revenues increased 10.3% year over year, as acquisitions
contributed significantly along with improvement in the core
business. However, higher costs in the quarter led to a
year-over-year gross margin contraction of 160 basis points to
Other Stocks to Consider
Some stocks worth considering in the machinery sector include
Flow International Corp.
Alamo Group, Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
ALAMO GROUP INC (ALG): Free Stock Analysis
ACTUANT CORP (ATU): Free Stock Analysis
FLOW INTL CORP (FLOW): Free Stock Analysis
LINDSAY CORP (LNN): Free Stock Analysis
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