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Altra Industrial (AIMC) Tops Q1 Earnings Estimates, Ups View


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Altra Industrial Motion Corporation AIMC reported impressive results for first-quarter 2018, with earnings surpassing estimates by 8.20%, marking an improvement from 4.1% negative surprise recorded in the previous quarter. Including the first-quarter results, the average earnings surprise for the last four trailing quarters was 5.06%.

The machinery company's non-GAAP earnings in the reported quarter were 66 cents per share, above the Zacks Consensus Estimate of 61 cents. The result excluded costs related to acquisitions and restructuring & consolidation as well as the loss on settlements of pension plans and tax adjustments.

The bottom line increased 24.5% from the year-ago tally of 53 cents on the back of an improving industrial market and gains from organic growth initiatives.

Strength in End-Markets Drives Net Sales

In the reported quarter, Altra Industrial Motion's net sales were $240.4 million, reflecting growth of 11.6% from the year-ago tally. Of the improvement, organic growth contributed 5.4% while the rest 6.2% came from favorable foreign-currency movements.

Also, the top line exceeded the Zacks Consensus Estimate of $233 million by 3.1%.

Sales generated from distribution, turf and garden, farm and agriculture, material handling, oil and gas, power generation, metal and mining end markets improved year over year in the quarter under review. These positives were partially offset by the weakness in sales, generated in the wind-energy market.

On a geographical basis, sales grew 9.1% in North America and 13.8% in the Asia Pacific and other regions, partially offset by the fall of 1.5% recorded in Europe.

The company reports revenues under the following heads/segments - Couplings Clutches & Brakes, Electromagnetic Clutches & Brakes and Gearing. A brief snapshot of the segmental sales is provided below:

Revenues generated from Electromagnetic Clutches & Brakes amounted to $69.1 million, increasing 8.2% from the year-ago quarter.

Couplings Clutches & Brakes' sales were roughly $120.2 million, reflecting year-over-year growth of 13.1%.

Gearing revenues grew 14.6% year over year to $53.9 million.

Margin Profile Improves

In the reported quarter, Altra Industrial Motion's cost of sales grew 11.3% year over year to $240.4 million. It represented 69.1% of net sales versus 69.3% in the year-ago quarter. Gross margin improved 20 basis points (bps) to 30.9%.

Selling, general and administrative expenses increased 16.7% year over year to $47.1 million and represented 19.6% of net sales. Research and development expenses were $6.5 million versus $6.2 million in the year-ago quarter. The non-GAAP operating margin in the quarter under review was 10.8%, up 20 bps year over year.

Balance Sheet & Cash Flow

Exiting the first quarter, Altra Industrial Motion's cash and cash equivalents were $46.4 million, down from $52 million recorded in the last reported quarter. Long-term debt inched up 1% sequentially to $278.3 million.

In the quarter under review, the company's net cash generation from operating activities totaled $3.7 million, slightly above $3 million generated in the year-ago quarter. Capital invested for purchasing property, plant and equipment was $7 million versus $7.3 million in the comparable quarter, a year ago.

Free cash outflow in the reported quarter was $3.3 million, below $4.3 million used in the year-ago quarter. During the quarter under review, the company paid dividends amounting to $5 million while refraining from repurchasing any shares.

Few days before releasing results, the company's board of directors approved payment of a quarterly cash dividend of 17 cents per share to shareholders of record as of Jun 18, 2018. The disbursement of dividends will be made on Jul 3, 2018.

Outlook

For 2018, Altra Industrial Motion anticipates benefiting from solid bookings in the majority of the end markets along with the healthy industrial economy. Also, the business combination with Fortive Corporation's FTV Automation and Specialty business will be immediately accretive to earnings. The completion of the transaction is anticipated by 2018-end.

The company raised projections for 2018, with sales of $910-$930 million versus the previous forecast of $895-$915 million. Non-GAAP earnings are expected to be $2.36-$2.49 per share, up from $2.30-$2.43 expected earlier. This revised bottom-line forecast exclude the impact of $5.4 million charges related to acquisitions made since the beginning of 2018.

The tax rate is anticipated be around 25-27% while capital spending is expected to be approximately $25-$27 million.

Altra Industrial Motion Corp. Price, Consensus and EPS Surprise

Altra Industrial Motion Corp. Price, Consensus and EPS Surprise | Altra Industrial Motion Corp. Quote

Zacks Rank & Other Stocks to Consider

With a market capitalization of approximately $1.2 billion, Altra Industrial Motion currently carries a Zacks Rank #2 (Buy).

Other stocks worth considering in the industry are DXP Enterprises, Inc. DXPE and Tennant Company TNC . Both the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

In the last 60 days, earnings estimates for each of these stocks improved for the current year. Also, average positive earnings surprise for last four quarters was 189.56% for DXP Enterprises and 1.39% for Tennant.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: DXPE , AIMC , TNC , FTV


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