Will Actuant Corporation (ATU) Miss Again on Q1 Earnings? - Analyst Blog

Actuant Corporation (ATU) is scheduled to report first-quarter fiscal 2015 results before the opening bell on Dec 18. Over the last four trailing quarters, the company reported a negative average earnings surprise of 4.65%. In fourth-quarter fiscal 2014, the company reported earnings of 47 cents per share, which missed the Zacks Consensus Estimate by 9.62%. Let's see how things are shaping up prior to the upcoming earnings announcement.

Factors to Influence Q1 Results

Actuant Corporation shares a high brand value in the market, and backed by certain strategic growth initiatives, it might generate superior results in the upcoming quarter. The industrial goods manufacturer has also introduced both organic and inorganic growth programs for the quarters ahead. Further, Actuant Corporation's capital deployment policy reflects its strong cash position. The company's authorized share repurchase program would help reduce outstanding shares, thereby boosting earnings in the upcoming quarters.  

However, Actuant Corporation's Industrial segment has suffered in recent times due to worldwide lower integration solutions activity and flat demand for Enerpac's industrial tool product line. Also, the Engineered Solution segment was adversely impacted by divestment. Additionally, the company's cost of sales and operating expenses increased 7.3% and 22.6%, respectively, in the fourth quarter. Rising expenses and costs have negatively affected the profit margin of the company as well.

Furthermore, the company generates a large proportion of its revenue from markets outside the U.S. As a result, its business in the foreign economies is often negatively affected by exchange rate volatility, environmental and political problems. Besides, threats of external market rivalry are diminishing the company's sales and operating margins, over time.  

For fiscal 2015, Actuant Corporation anticipates headwinds of 8 cents and 5 cents per share from higher tax rate and foreign currency translation, respectively. Investors presently remain dubious about Actuant Corporation's performance in the imminent quarters as reflected in the downward revision in earnings estimates.

Earnings Whispers

Our proven model conclusively shows that Actuant Corporation is likely to miss earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for an earnings beat. That is not the case here as we will see below.

Zacks ESP: Actuant Corporation currently possesses an Earnings ESP of -4.65%. This is because the Zacks Consensus Estimate of 43 cents stands above the Most Accurate Estimate of 41 cents.

Zacks Rank: Actuant Corporation's Zacks Rank #4 (Sell), when combined with a negative ESP, makes surprise predictions difficult. We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Kennametal Inc. (KMT), with an Earnings ESP of +3.51% and a Zacks Rank #3.

Stanley Black & Decker, Inc. (SWK), with an Earnings ESP of +2.63% and a Zacks Rank #3.

Cincinnati Bell Inc. (CBB), with an Earnings ESP of +33.33% and a Zacks Rank #3.
 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
STANLEY B&D INC (SWK): Free Stock Analysis Report
 
CINCINNATI BELL (CBB): Free Stock Analysis Report
 
ACTUANT CORP (ATU): Free Stock Analysis Report
 
KENNAMETAL INC (KMT): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research