UPDATE: Citi Upgrades Actuant Corporation To Buy, Raises PT To $34

Citi is upgrading Actuant ATU shares from Hold to Buy as it appears that investor worry about recent margin pressure is overdone, providing an attractive entry-point for this high quality, diversified industrial small cap, which it believes is well-positioned to outperform at this point in the cycle. Actuant has attractive 89% exposure to early + mid-cycle markets, ranking it the highest in the Multi-Industry sector, and its industrial and energy markets are on pace to drive FY11 organic sales growth of 9%-11%. Citi is a big fan of Actuant's consistently strong FCF conversion and ROIC which ranks it among the sector leaders. Share weakness following earnings last week has created an attractive entry point. Investors were evidently surprised by the seasonality of the recently acquired Mastervolt business and prospects for modest px/cost pressures. Citi believes both concerns are overdone/discounted. Citi likes the prospects for quarterly “beat and raises” in 2HF11, potential upside from M&A, and ATU's leverage to the rebound in deep sea drilling. ATU is trading higher at $28.06