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Earnings Analysis for Actuant Corp. Cl A (ATU)

Actuant Corporation (NYSE:ATU) recently reported its preliminary financial results based on which we provide a unique peer-based analysis of the company. Our analysis is based on the company’s performance over the last twelve months (unless stated otherwise). For a more detailed analysis of this company (and over 40,000 other global equities) please

Actuant Corp. Cl A’s analysis versus peers uses the following peer-set: Parker-Hannifin Corporation (NYSE:PH), Rotork p.l.c. (LON:ROR), Crane Co. (NYSE:CR), BELIMO Holding AG (BEAN), Sun Hydraulics Corporation (NASDAQ:SNHY) and CKD Corp (TYO:6407). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Earnings Analysis for Actuant Corp. Cl A (ATU)

Valuation Drivers

Actuant Corp. Cl A’s current Price/Book of 2.1 is about median in its peer group. The market expects ATU-US to grow faster than the median of its chosen peers (PE of 25.8 compared to peer median of 18.6) and to improve its current ROE of 8.8% which is below its peer median of 22.4%. Thus, the market seems to expect a turnaround in ATU-US’s current performance.

The company does not seem to have a viable operating strategy as is evident from low net profit margins (currently 5.4% vs. peer median of 8.8%) and poor asset turns (currently 0.8x compared to peer median of 1.2x). We classify this operating model as problematic relative to its peers. ATU-US’s net margin has declined 3.2 percentage points from last year’s high and is now below its five-year average net margin of 6.2.

Economic Moat

ATU-US’s revenues have changed in-line with its peers (year-on-year change in revenues is 11.1%) but its earnings have lagged (annual reported earnings have changed by -29.9% compared to the peer median of -16.0%), implying that the company has less control over its costs relative to its peers. ATU-US is currently converting every 1% of change in revenue into -2.7% change in annual reported earnings.

ATU-US’s return on assets is less than its peer median currently (4.3% vs. peer median 10.4%). It has also had less than peer median returns on assets over the past five years (4.9% vs. peer median 8.2%). This performance suggests that the company has persistent operating challenges relative to peers.

The company’s gross margin of 40.0% is around peer median suggesting that ATU-US’s operations do not benefit from any differentiating pricing advantage. In addition, ATU-US’s pre-tax margin is less than the peer median (7.5% compared to 12.0%) suggesting relatively high operating costs.

Growth & Investment Strategy

ATU-US has grown its revenues faster than its peers (9.0% vs. 4.6% respectively for the past three years). The market also sees relatively higher long-term growth prospects for the company, giving it a better than peer median PE ratio of 25.8. Overall, we classify the company’s growth prospects as superior relative to its peers.

ATU-US’sannualized rate of change in capital of 7.9% over the past three years is around its peer median of 7.9%. This investment has generated a less than peer median return on capital of 7.3% averaged over the same three years. The below median return implies that the company is not investing well.

Earnings Quality

ATU-US reported relatively weak net income margins for the last twelve months (5.4% vs. peer median of 8.8%). This weak margin performance and relatively conservative accrual policy (5.9% vs. peer median of 3.3%) suggest the company might likely be understating its net income, possibly to the extent that there might even be somesandbagging of the reported net income numbers.

ATU-US’s accruals over the last twelve months are positive suggesting a buildup of reserves. In addition, the level of accrual is greater than the peer median — which suggests a relatively strong buildup in reserves compared to its peers.

Trend Charts

Graph of Revenues Trend for Actuant Corp. Cl A (ATU) Quarterly
Graph of Revenues Trend for Actuant Corp. Cl A (ATU) Annual or TTM
Graph of Net Margin Trend for Actuant Corp. Cl A (ATU) Quarterly
Graph of Net Margin Trend for Actuant Corp. Cl A (ATU) Annual or TTM
Graph of Accruals Trend (% revenues, Quarterly) for Actuant Corp. Cl A (ATU) Quarterly
Graph of Accruals Trend (% revenues, Annual or TTM) for Actuant Corp. Cl A (ATU) Annual or TTM

Company Profile

Actuant Corp. is a diversified industrial company. The company designs, manufactures and distributes a broad range of industrial products and systems to various end markets. It operates through four business segments: Industrial, Energy, Electrical and Engineered Solutions. The Industrial segment designs, manufactures and distributes branded hydraulic and mechanical tools to the maintenance, industrial, infrastructure and production automation markets. Its primary products include high-force hydraulic tools, highly engineered heavy lifting solutions, workholding solutions and concrete stressing products. This segment markets its products through Enerpac, Simplex, Precision Sure-Lock and Milwaukee Cylinder brand names. The Energy segment provides joint integrity products and services, as well as umbilical, rope and cable solutions to the global oil & gas, power generation and energy markets. It also provides manpower services, including machining, engineering and maintenance activities. This segment markets its products primarily through Hydratight, D.L. Ricci, Morgrip, Cortland, FibronBX, Puget Sound Rope, Biach and Selantic brands. The Electrical segment designs, manufactures and distributes broad range of electrical products to the retail DIY, wholesale, original equipment manufacturer, solar, utility, marine and other harsh environment markets. This segment provides the retail DIY market with a variety of electrical tools and consumables such as wire strippers, electrical meters, connectors, terminals, cable ties, staples and other wire management products and conduit bending equipment under the Gardner Bender, Del City and A.W. Sperry brands. The Engineered Solutions segment is a global designer and assembler of customized position and motion control systems and other industrial products to various transportation and other niche markets. This segment provides technical and highly engineered products, including actuation systems, mechanical power transmission products, engine air flow management solutions, rugged electronic instrumentation and flexible power transmission systems. Actuant Corp was founded in 1910 and is headquartered in Menomonee Falls, WI.


The information presented in this report has been obtained from sources deemed to be reliable, but AnalytixInsight does not make any representation about the accuracy, completeness, or timeliness of this information. This report was produced by AnalytixInsight for informational purposes only and nothing contained herein should be construed as an offer to buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument. This report is current only as of the date that it was published and the opinions, estimates, ratings and other information may change without notice or publication. Past performance is no guarantee of future results. Prior to making an investment or other financial decision, please consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any party’s use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain a position, or make a market in any security referred to herein. One of the principal tenets for us at AnalytixInsight is that the best person to handle your finances is you. By your use of our services or by reading any our reports, you’re agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that AnalytixInsight, its directors, its employees, and its agents will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material generated by us and/or published through our services. For a complete copy of our disclaimer, please visit our website
This article was originally written by abha.dawesar, and posted on CapitalCube.

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