With Actuant Corp ATU rallying from its recent trough on news of improvement in international offshore rig counts, the stock's valuation appears stretched, according to JPMorgan.
The Analyst
Ann Duignan of JP Morgan downgraded Actuant from Neutral to Underweight with a $25 price target.
The Thesis
Actuant shares rallied following Wednesday’s third-quarter earnings beat and are up around 23 percent from its recent trough on the offshore rig count news, Duignan said in the Thursday downgrade note. (See the analyst's track record here.)
The news does not justify such valuation, as Actuant's subsidiaries Hydratight and Cortland are not leveraged to rig counts, the analyst said.
“We spoke with management following the earnings call; it reiterated that offshore rig counts are not a good leading indicator of its energy segment performance," Duignan said.
Actuant also stated that there is little visibility in the energy segment, which has diminishing exposure to offshore capex and exploration, the analyst said.
Price Action
Actuant shares were down 0.34 percent at $28.95 at the time of publication Thursday.
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