) has missed in each of the last three earnings reports and has
seen estimate. It is a Zacks Rank #4 (Sell). It is the Bear of the
Guiding Lower, Not comparable
Sometimes the Zacks Rank can move lower on a company that is
actually doing just fine. This could be one of those situations, as
Actuant (ATU) reported a miss, but then guided substantially lower.
The reason for the lowered guidance is the expected sale of the
electric equipment business, a move that was announced in early
June. The removal of this business has caused estimates to drop
Actuant designs and sells industrial products and systems. The
industrial segment provides high-force hydraulic tools, heavy
lifting solutions, production automation solutions, and concrete
stressing products to the general maintenance and repair,
industrial, infrastructure, and production automation markets. The
company was founded in 1910 and is headquartered in Menomonee
Looking to the earnings history, we see three straight misses. Two
times there was a miss of one cent, and the February 2013 quarter
was a two cent miss.
Trading Lower After Reporting
Investors might want to take special notice of this idea. In the
session following the earnings report, ATU has fallen in each of
the last five quarters. Ironically, the biggest decrease in stock
price, 7.6%, came after a $0.01 beat following the May 2012
Earnings Estimates Tick Lower
Despite a nice run by the stock, the estimates for ATU have been
moving the other way for some time now. The Zacks Consensus
Estimate for 2013 has moved from $2.28 in September 2012 to $2.18
in December of the same year. A tick lower by one cent happened in
April of 2013 and now the Zacks Consensus Estimate is calling for
The same could be said of the 2014 Zacks Consensus Estimate as it
fell from $2.49 in September, to $2.42 in January 2013 down to
$2.41 in May. The recent guidance has pushed that number to $2.02.
Earnings estimate revisions are the largest component of the Zacks
Rank that can influence a change in rank.
The valuation picture for ATU shows the company already trading at
a premium to the industry average on each metric that investors
tend to look at. The trailing PE of 16.5x is higher than the 13.8x
industry average, while the forward PE sports a bigger premium of
17.7x compared to the 13.4x industry average. Price to book carries
a multiple of 2.4x compared to 2.3x for the industry average, which
is not that much, but still a premium. The price to sales multiple
of 1.7x is also higher than the 0.8x industry average.
The price and consensus chart shows a disturbing trend in earnings
estimates. While a big move lower on earnings estimates can be
explained by things like a divestiture, but that could also end up
impacting margins as well. The end idea is that investors might
want to wait to see how everything shakes out before making an
initial or follow on investment in ATU. Other industrial stocks
like Lincoln Electric (LECO) carry a higher Zacks Rank and might be
worth a closer look.
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor
in charge of the
Run Investor service
, a Buy and Hold service where he recommends the stocks in the
Brian is also the editor of
Breakout Growth Trader
a trading service that focuses on small cap stocks and also carries
a risk limiting strategy. Subscribers get daily emails along with
buy, and sell alerts.
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