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Big Earnings Movers: Actuant Corporation (NYSE:ATU)

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Actuant Corporation (NYSE:ATU) reported earnings for the three months ended May 2016 on June 22, 2016. The company earned $0.4 per share on revenue of $305.34M. Analysts had been modeling earning per share of $0.37 with $294.23M in revenue.

Actuant Corporation (NYSE:ATU) announced results for its third quarter ended May 31, 2016.

Highlights

  • Consolidated sales were 5% below the comparable prior year quarter, including a positive 2% impact from acquisitions offset by a 1% decline from the stronger US dollar. Core sales declined 6% on a year-over-year basis (total sales excluding the impact of acquisitions, divestitures and foreign currency exchange rates).
  • GAAP diluted earnings per share (“EPS”) were $0.36 compared to $0.63 in the prior year. Excluding third quarter fiscal 2016 restructuring charges, adjusted EPS was $0.40 (see “Consolidated Results” below and the attached reconciliation of earnings).
  • Restructuring activities continue to proceed as planned with $3.5 million of pre-tax charges ($0.04 per share) incurred in the third quarter related to facility consolidations, structural changes and staffing reductions.
  • Robust free cash flow benefitting from strong working capital management.
  • Repurchased 0.2 million shares of common stock during the quarter for approximately $5 million.
  • Deployed approximately $65 million of capital on a Middle East region pipeline & process services strategic tuck-in acquisition to the Hydratight business.
  • Updated full year sales and adjusted EPS guidance, now expected to be approximately $1.150 billion and $1.20-1.25 per share, respectively (excluding impairment and restructuring charges).

Consolidated Results

Consolidated sales for the third quarter were $305 million, 5% lower than the $320 million in the comparable prior year quarter. Core sales declined 6% while acquisitions added 2% and foreign currency exchange rate changes reduced sales 1%. Fiscal 2016 third quarter net earnings were $21.2 million, or $0.36 per share compared to $38.0 million or $0.63 per share in the comparable prior year period. Excluding fiscal 2016 restructuring costs, third quarter fiscal 2016 adjusted EPS was $0.40 compared to $0.63 in the comparable prior year period (see attached reconciliation of earnings).

Sales for the nine months ended May 31, 2016 were $874 million, 8% lower than the $949 million in the comparable prior year period. Excluding the negative 4% impact of foreign currency rate changes, and 1% benefit from acquisitions, fiscal 2016 year-to-date core sales decreased 5% from the prior year. The fiscal 2016 year-to-date net loss was $122.6 million or $2.08 per share, compared to a net loss of $2.2 million or $0.04 per share in the prior year. Excluding impairment charges in both years, as well as fiscal 2016 year-to-date pre-tax restructuring charges of $11.5 million, or $0.14 per share, fiscal 2016 year-to-date adjusted EPS was $0.92 compared to $1.28 in the comparable prior year period (see attached reconciliation of earnings).

Financial Position

Net debt at May 31, 2016 was $451 million (total debt of $588 million less $137 million of cash). The increase in net debt of approximately $18 million during the quarter was due to $65 million of cash deployed on acquisitions, coupled with $5 million used to repurchase 0.2 million shares of common stock, partially offset by strong third quarter free cash flow. At May 31, 2016, the Company had net leverage of 2.7X for bank reporting purposes.

Actuant Corporation earnings per share showed a decreasing trend of -83.6% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 139%.Analysts project EPS decline over the next 5 years at -0.2%. It has EPS annual decline over the past 5 fiscal years of -19.9% when sales grew 1.5. It reported -12.5% sales drop, and -157% EPS decline in the last quarter.

The stock is trading at $24.9, up 46.3% from 52-week low of $17.02. The stock trades down -10.14% from its peak of $27.71 and % below the consensus price target of $22.71. Its volume clocked up at 1.58 million shares which is higher than the average volume of 0.56 million shares. Its market capitalization currently stands at $1.45B.

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