Altra Industrial (AIMC) Beats on Q2 Earnings, Raises View
Altra Industrial Motion Corp. AIMC reported impressive results for the second quarter of 2020, with earnings surpassing estimates by 76.47%. Also, sales beat estimates by 6.71%.
Better-than-expected results and upwardly revised projections seem to have lifted market sentiments for the stock. Notably, the company gained 1.3% on Friday, ending the trading session at $34.55.
The machinery company’s non-GAAP earnings in the reported quarter were 60 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. However, the bottom line decreased 15.5% from the year-ago quarter figure of 71 cents.
The company noted that it benefited from healthy demand in wind energy and Class 8 truck markets in China in the second quarter. Along with this, its cost-reduction measures and healthy cash-flow generation in the quarter were encouraging, especially amid the pandemic scare.
In the reported quarter, Altra Industrial’s revenues were $400.8 million, reflecting a decline of 14.1% from the year-ago number.
Forex woes had an adverse impact of 1.6% on the quarter’s sales. Also, organic sales declined 12.5% year over year due to weakness in several end markets — including aerospace & defense, transportation, distribution, metals, mining, turf & garden, medical equipment, and oil & gas. Notably, business in renewable energy, factory automation & specialty machinery, and agriculture markets improved in the quarter.
However, the company’s revenues surpassed the Zacks Consensus Estimate of $376 million.
Altra Industrial reports revenues under two heads — Automation & Specialty, and Power Transmission Technologies. A brief snapshot of the segmental sales is provided below:
Revenues generated from Power Transmission Technologies amounted to $196.3 million, declining 16.4% year over year.
Automation & Specialty’s sales were $205.8 million in the second quarter, down 11.8% from the last reported quarter.
In the reported quarter, Altra Industrial’s cost of sales decreased 14.1% year over year to $257.4 million. Notably, cost of sales represented 64.2% of net sales. Non-GAAP gross profit was $143.4 million, down 14.1% year over year. Gross margin remained stable year over year at 35.8%.
Non-GAAP selling, general and administrative expenses decreased 21% year over year to $58 million and represented 14.5% of net sales. Research and development expenses were $14 million versus $14.7 million in the year-ago quarter.
Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $88.9 million, the margin being 22.2%. Non-GAAP operating income in the reported quarter declined 9.5% year over year to $71.4 million, with non-GAAP operating margin increasing 90 basis points to 17.8%.
Net interest expenses totaled $18.8 million in the reported quarter, reflecting an increase of 1.1% from the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the second quarter, Altra Industrial’s cash and cash equivalents were $220.1 million, decreasing 32.7% from $326.9 million recorded in the last reported quarter. Long-term debt was $1,535.6 million, reflecting a 7.4% decrease from $1,658.5 million in the last reported quarter.
During the first half of 2020, the company repaid $30 million of borrowing under its term-loan facility and $100 million under its revolving credit facility. Additional borrowing under its revolving facility totaled $100 million.
In the first half of 2020, the company generated net cash of $73.7 million from operating activities, down 23.3% from the year-ago comparable period. Capital invested for purchasing property, plant and equipment totaled $17.3 million, decreasing 28.2% year over year. Non-GAAP free cash flow was $56.4 million versus $72 million in the year-ago period.
In the first half of 2020, the company paid out dividends amounting to $22.3 million, slightly above $22 million distributed in the prior-year comparable period.
Couple of days before the earnings release, the company announced that its board of directors approved the payment of a quarterly dividend of 4 cents per share. The payment will be made on Oct 2 to shareholders of record as of Sep 18, 2020.
Altra Industrial noted that workers’ safety, providing services to customers, solid liquidity position, debt reduction and a healthy supply chain are its priorities at present. Also, it expects growth opportunities to be healthy in robotics, factory automation, food processing and medical equipment markets post pandemic.
For 2020, the company anticipates sales of $1,580-$1,640 million, higher from the previously mentioned $1,540-$1,620 million.
Non-GAAP earnings are expected to be $2.05-$2.30, up from $1.67-$2.03 per share stated earlier. Also, non-GAAP adjusted EBITDA is likely to be $305-$330 million (up from the earlier mentioned $281-$317 million). The tax rate is still anticipated to be 21-23%. Capital spending is expected to be $40-$45 million.
Altra Industrial Motion Corp. Price, Consensus and EPS Surprise
Zacks Rank & Other Stocks to Consider
With a market capitalization of $2.2 billion, Altra Industrial currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the industry are Graco Inc. GGG, Ingersoll Rand Inc. IR and The Middleby Corporation MIDD. While Graco currently sports a Zacks Rank #1 (Strong Buy), both Ingersoll Rand and Middleby carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for these companies improved for the current year. Further, earnings surprise for the last four quarters, on average, was 8.68% for Graco, 3.47% for Ingersoll Rand and 7.54% for Middleby.
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