Technology

Here's Why it is Worth Investing in Actuant (ATU) Stock Now

Investors seeking exposure in the industrial machinery space can choose from stocks that sport a Zacks Rank #1 (Strong Buy) or #2 (Buy). Of the many investment options, we believe that Actuant Corporation ATU will be a smart choice. This Menomonee Falls, WI-based company’s stock currently carries a Zacks Rank #2 and a VGM Score of B.

The industry, to which Actuant belongs, is currently positioned among the top 40% of more than 250 Zacks industries. Per our research, the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. We believe that the strengthening housing market, infrastructural development, lower taxes (due to the implementation of the U.S. Tax Cuts and Jobs Act), solid manufacturing activities and other tailwinds aid the industry.

Below, we discussed why investing in Actuant will be a smart choice for investors.

Share Price Performance & Impressive Earnings Projections: Market sentiments seem to be working in favor of Actuant. In the past three months, the company’s share price has improved 15.7% compared with the industry’s growth of 9.5%.




It’s worth mentioning here that the company’s shares have increased 0.5% since the release of second-quarter fiscal 2019 (ended Feb 28, 2019) results on Mar 21, 2019. The company delivered impressive results for the quarter, with earnings beating estimates by 11.76%. On a year-over-year basis, the bottom line expanded 46.2% on the back of margin improvement.

For fiscal 2019 (ending August 2019), the company anticipates product development, better services to customers, enhancement of operational efficiency and portfolio restructuring measures to be beneficial. Adjusted earnings per share projection have been reaffirmed at $1.09-$1.20. The mid-point of the projected range is way above the year-ago quarter’s $1.09.

Positive Revision in Earnings Estimates: Impressive results and solid outlook created positive sentiments for Actuant. In the past 30 days, earnings estimates for fiscal 2019 have been raised by four brokerage firms, and that for fiscal 2020 (ending August 2020) by three firms. Currently, the Zacks Consensus Estimate for earnings is pegged at $1.17 for fiscal 2019 and $1.37 for fiscal 2020, reflecting growth of 0.9% and 1.5%, respectively.

Actuant Corporation Price and Consensus

Actuant Corporation Price and Consensus | Actuant Corporation Quote

Margin Improvement: In the fiscal second quarter, Actuant's gross and operating margins expanded 330 basis points (bps) and 240 bps year over year, respectively. The company noted that its margins improved on account of greater operational efficacy.

Inorganic Moves: Over time, Actuant has fortified its product portfolio and leveraged business opportunities through the addition of assets and disposition of non-core assets. Buyouts of Mirage Machines (in December 2017) and Equalizer (In May 2018) are worth mentioning. While Mirage Machines has been strengthening the company's energy business, Equalizer has aided the industrial business.

Meanwhile, the company divested its Cortland Fibron and Precision-Hayes International businesses in December 2018. Also, the company intends to divest the Engineered Components & Systems segment. These divestments will enable Actuant to make more investments in its best-performing business arms and provide higher returns to shareholders, going forward.

Other Key Picks

Some stocks worth considering in the Zacks Industrial Products sector are DXP Enterprises, Inc. DXPE, Sun Hydraulics Corporation SNHY and Roper Technologies, Inc. ROP. While DXP Enterprises and Sun Hydraulics currently sport a Zacks Rank #1 (Strong Buy), Roper carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for all the three stocks have improved for the current year. Further, average earnings surprise for the last four quarters was a positive 46.55% for DXP Enterprises, 2.27% for Sun Hydraulics and 4.96% for Roper.

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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.

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