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Altra (AIMC) Down 5.2% Since Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Altra Industrial Motion Corp.AIMC . Shares have lost about 5.2% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Fourth-Quarter 2016 Highlights

Altra Industrial Motion reported better-than-expected results for fourth-quarter 2016.

Earnings: Quarterly earnings came in at $0.41 per share, above the Zacks Consensus Estimate of $0.34. In addition, the bottom line surpassed the year-ago tally by 13.9%. The upside came on the back of solid sales volume, greater operational efficacy and favorable pricing conditions.

Full-year 2016 earnings came in at $1.56 per share, compared with the prior-year figure of $1.64 per share.

Revenues: Quarterly revenues totaled $172.6 million, higher than the Zacks Consensus Estimate of $171 million. However, the top line marginally fell short of the year-ago tally by 0.6%. The downside was witnessed due to the foreign exchange impact of 2%, which was noticeably offset by the 0.9% favorable price impact and 0.5% rise in organic sales.

Full-year 2016 revenues summed $708.9 million compared to $746.7 million reported in 2015.

Segmental Details

Altra Industrial Motion reports its revenues under the following heads/segments - Couplings Clutches & Brakes, Electromagnetic Clutches & Brakes, and Gearing.

Details of the segmental sales have been provided below:

Electromagnetic Clutches & Brakes revenues edged down 1.2% year over year to $52.8 million.

Couplings Clutches & Brakes sales came in at $74.2 million, down 3.8% year over year.

Sales in the Gearing segment totaled $47.0 million, down 5.2% year over year.

Margins: In the quarter, Altra Industrial Motion's cost of sales dipped 1.6% year over year, representing 68.1% of revenue versus 68.8% in the year-ago quarter. Gross margin expanded 70 basis points (bps) year over year to 31.9%. Selling, general and administrative expenses were roughly $34.9 million, accounting for 20.2% of revenues.

Balance Sheet & Cash Flow: Exiting the fourth quarter, Altra Industrial Motion's cash and cash equivalents climbed to $69.1 million from $50.3 million recorded on Dec 31, 2015. Long-term debt was $326 million, higher than $231.6 million recorded at the end of 2015.

At the end of 2016, Altra Industrial Motion generated cash of $76.6 million from its operating activities, lower than the year-ago tally of $86.8 million. Cash used for the purchase of property, plant and equipment totaled $18.9 million, down from $22.9 million in the year-earlier period.

Outlook: During fourth-quarter 2016, Altra Industrial Motion completed the Stromag acquisition and believes this deal to significantly fortify its presence in niche markets over the long term. The company is poised to grow on the back of solid demand, smooth supply chain operations and favorable pricing conditions. However, Altra Industrial Motion expects foreign exchange headwind (due to a strong U.S. dollar) to hurt its revenues and earnings, moving ahead.

Based on the existing market conditions, the company projects to accrue revenues within the range of $835-$855 million and earnings in the band of $1.75-$1.85 per share for full-year 2017.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revision for the current quarter. In the past month, the consensus estimate also shifted downward by 5.6 % due to these changes.

Altra Industrial Motion Corp. Price and Consensus

Altra Industrial Motion Corp. Price and Consensus | Altra Industrial Motion Corp. Quote

VGM Scores

At this time, Altra's stock has a nice Growth Score of 'B', a grade with the same score on the momentum front. Following the exact same course, the stock was allocated also a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value, growth, and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #2 (Buy). We are looking for an above average return from the stock in the next few months.

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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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