Updated Research Report on Actuant - Analyst Blog

On Apr 3, 2014, we issued an updated research report on Actuant Corporation ATU. The company delivered mixed results for fiscal second-quarter 2014 (ended Feb 28, 2014). Earnings per share in the quarter decreased roughly 14% year over year to 30 cents. However, quarterly revenues of $327.8 million were up 9% from the year-ago quarter.

The company achieved higher revenues primarily from the acquisitions undertaken in the previous quarters. The company completed the acquisition of Viking SeaTech in Aug 2013 which contributed significantly to the second-quarter revenues. The company expects to reap benefits from Viking's strong foothold in the mooring business and generate roughly $100 million in fiscal 2014.

However, growth in core sales cannot be overlooked. In the reported quarter, Actuant reported core sales growth of 4% year over year, led primarily by core sales growth in the Energy and Engineered Solutions segments. In fiscal 2014, core sales are expected to grow in mid single-digits.

Increase in acquisitions is also leading to a hike in the company's integration costs. In the second quarter of fiscal 2014, the company recorded reduced operating margins due to unfavorable segment and acquisition mix. With the inclusion of Viking, which bears a higher fixed cost structure, the operating profit margin declined 40 basis points year over year to 11.9% in the quarter.

These factors lowered the earnings estimates. In the last 30 days, the Zacks Consensus Estimate for fiscal 2014 and fiscal 2015 declined a respective of 2.5% and 1.3% to $1.97 and $2.28.

Key Picks from the Sector

With a current market capitalization of $2.5 billion, Actuant has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Kadant Inc. KAI, Lincoln Electric Holdings Inc. LECO and The Middleby Corporation MIDD. While Kadant and Middleby carry a Zacks Rank #1 (Strong Buy), Lincoln Electric Holdings sports a Zacks Rank #2 (Buy).