Citi Gives Analyst Day Recap On Actuant Corporation

Actuant Corporation's ATU analyst day in NYC on Oct 12 was positive at the margin but not necessarily stock-moving following its solid F4Q10 earnings release on September 29. Actuant reaffirmed its recently-issued guidance for $1.30-$1.45 of EPS and 6%-10% organic growth. A new disclosure at the meeting was management's implementation of processes to drive longer term organic growth 200-300 basis points above its historical average of 4%-5%. New product development and innovation processes were launched over the past quarter and are still in the very early stages. Separately, the M&A pipeline is refilling across each segment and management reiterated its target for $100-$150 million of deals in FY11, implying potential upside to guidance since future acquisitions are not included. Management estimates it could use $500 million for M&A and remain within its 1.5x-2.5x debt/EBITDA threshold. Fundamentals appear solid, but valuation looks a bit expensive, supporting our Hold rating. ATU closed Tuesday at $23.49