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Actuant Provides Weak Guidance Despite Q4 Earnings Beat

Premium diversified machinery company Actuant CorporationATU reported results for fourth-quarter fiscal 2015. Quarterly results beat expectations but were adversely affected by lower demand in the general industrial, oil & gas, mining and agricultural markets. Moreover, margins were hurt by unfavorable sales mix, variations in purchase price and weaker absorption as well as production due to inventory de-stocking.

Quarterly earnings came in at 37 cents per share, down 21.3% year over year. However, the bottom line was 27.6% higher than the Zacks Consensus Estimate of 29 cents.

For fiscal 2015, earnings came in at $1.65 per share, down 13.6% year over year.

Revenues, Cost & Margins

In fourth-quarter fiscal 2015, Actuant generated net revenue of $300.4 million, down 15.2% year over year. However, the top line surpassed the Zacks Consensus Estimate of $295 million.

The company's cost of sales was $193.8 million in the quarter, down 8.7% year over year. Gross margin decreased 460 basis points (bps) to 35.5%. Selling, administrative and engineering expenses were $71.8 million, down from $87.4 million recorded a year ago.

For the quarter, the company reported adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") of $41.2 million, down from the year-ago tally of $74.5 million.

For fiscal 2015, the company's revenues were $1,249.3 million compared with $1,399.9 million generated at fiscal 2014-end. Gross margin for the full year was 37%, down 210 bps year over year.

Balance Sheet and Cash Flow

Exiting fourth quarter, Actuant had cash and cash equivalents of $168.8 million, up 54.9% from $109 million reported on Aug 31, 2014. Long-term debt stood at $584.3million, up from $385.5 million recorded at the end of fiscal 2014.

Actuant generated cash worth $87.7 million from its operating activities, higher than $52 million accrued in the prior-year quarter. Capital spending totaled $5.3 million compared with $8 million in fourth-quarter fiscal 2014.

During the quarter, Actuant repurchased approximately 0.3 million shares for $7 million.

Segmental Performance

Revenues from the Industrial segment fell 10.6% year over year to $100 million. The decline was led by unfavorable impact of currency translation and lower core sales. Moreover, sluggish industrial markets of North America and China resulted in weaker demand for industrial tools during the quarter. Operating profit margin of the segment was 26.3%, down 300 bps year over year, as a result of purchase price variations due to a strong U.S. dollar and weaker overhead absorption related to inventory reduction activities.

Energy Segment revenues decreased 18.2% year over year to $100.8 million. The fall was triggered by foreign currency headwinds, lower Viking sales growth, reduced upstream capital expenditure in Cortland and negative core sales of Hydratight. The segment's adjusted operating profit margin fell 570 bps year over year to 9%, on account of restructuring expenses, weak production absorption, unfavorable mix and reduced margins in Vikings.

Revenues from the Engineered Solution Segment fell 16.6% year over year to $99.5 million. Stronger U.S. dollar, divestiture of RV product-line and weaker core sales were largely responsible for the year-over-year decline in revenues. Operating profit margin slid to 3.2% from 4.7% in the year-ago quarter, mainly due to weaker absorption volumes, purchase price variations due to a strong U.S. dollar and restructuring expenses.

Outlook

Actuant aims to improve its future performance on the back of enhanced productivity and effective cost-management initiatives. However, the company anticipates weak demand conditions to continue weighing on its quarterly revenues and earnings in 2016 as well. Based on the current business scenario, the company expects sales in a range of $1.16-1.20 billion and earnings within $1.20-$1.40 per share for fiscal 2016.

Actuant Corporation presently holds a Zacks Rank #4 (Sell).

Stocks to Consider

Better-ranked stocks in the industry include Casella Waste Systems Inc. CWST , Codexis, Inc. CDXS and CECO Environmental Corp. CECE . All three stocks carry a Zacks Rank #2 (Buy).

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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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