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Actuant (ATU) Faces Headwind Perils, Retains Few Scopes

On Oct 5, 2015, we issued an updated research report on premium industrial goods manufacturer Actuant CorporationATU . The company is involved in designing, manufacture and distribution of various industrial products and systems in more than 30 countries. Despite achieving significant success since its inception in 1910, Actuant currently faces several risks in its business.

Problems to Consider

Enjoying a high brand status in the market, Actuant remains keen on improving its business through greater degree of globalization. However, increased foreign trade exposes the company to several risks associated with macroeconomic uncertainties. In fourth-quarter fiscal 2015, the company's earnings and revenues fell 21.3% and 15.2% year over year, respectively, largely hit by unfavorable appreciation of the U.S. dollar. A persistently hostile currency environment can further dampen Actuant's prospects.

Moreover, of late, Actuant's financials are adversely affected by poor end-market conditions primarily led by lower oil prices . Reduced demand in the general industrial, oil & gas, mining and agricultural markets adversely affected the company's revenues in fourth-quarter fiscal 2015. Also, its quarterly margins were hurt by unfavorable sales mix, purchase price variations and weaker absorption as well as production related to inventory de-stocking. These issues, if not resolved soon, would continue to affect the company's revenues and margins negatively in the upcoming quarters.

A Few Avenues

We anticipate the above-mentioned negatives to continue weighing on this Zacks Rank #4 (Sell) stock's top- and bottom-line results, going ahead. However, certain tactical initiatives undertaken by the company might partially offset the impact of such adversities. For instance, Actuant follows prudent capital-deployment strategies. Committed to increasing its shareholders' value, the company manages to offer lucrative deals by improving its free cash flow within operations.

In order to combat the negative impact of market uncertainties, the company is introducing specialized cost-reduction initiatives and productivity-enhancement strategies, apart from making new investments toward innovation. We believe such initiatives would boost the company's top- and bottom-line figures in the quarters ahead.

Stocks to Consider

Better-ranked stocks in the industry include Codexis, Inc. CDXS , ACCO Brands Corporation ACCO and Global Brass and Copper Holdings, Inc. BRSS . While both ACCO Brands Corporation and Global Brass and Copper Holdings sport a Zacks Rank #1 (Strong Buy), Codexis holds a Zacks Rank #2 (Buy).

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ACTUANT CORP (ATU): Free Stock Analysis Report

ACCO BRANDS CP (ACCO): Free Stock Analysis Report

CODEXIS INC (CDXS): Free Stock Analysis Report

GLOBAL B&C HLD (BRSS): Free Stock Analysis Report

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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.


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

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