Actuant offers solid growth prospects at a good price

Zacks ranks this industrial tools manufacturer an aggressive growth 'buy' for consistent performance.

By Zacks.com Feb 24, 2012 2:46PM

Image: Nuts and Bolts © Andrew Bret Wallis/Photodisc/Getty ImagesBy Brian Bolan
    
Actuant Corporation (ATU) has a good history of positive earnings surprises and an attractive valuation. The stock is a Zacks No. 2 rank (buy).


Actuant designs, manufactures, and distributes industrial products and systems worldwide. The company's industrial segment provides hydraulic and mechanical tools, including heavy-lifting solutions. Its energy segment offers joint integrity products that consist of hydraulic torque wrenches, bolt tensioners, and portable machining equipment.


Of the last seven earnings reports, ATU has posted six beats and one meet. The company reported in-line earnings for the February 2011 quarter, but the following three earnings reports were strong.


A $0.05 beat for the May 2011 quarter saw a 6.7% move in the stock. The August 2011 quarter saw earnings $0.03 ahead of the Zacks Consensus Estimate and translated into a 6.9% move for the stock. The $0.07 or 16% beat for the November 2011 quarter pushed the stock higher by 9.8%.

 

The company posted solid bottom line results on the last two reports. One of the key drivers in each of those beats has been the top-line or revenue for the company. The August 2011 quarter came in $10 million above expectations or a 2% beat. The November 2011 quarter had revenue top the Zacks Consensus Estimate by $18 million or 4.9%.


Analysts have been moving estimates higher for ATU over the last several months. In November of 2011, analysts expected $1.89 in earnings for 2012. That estimate was moved higher to $1.97 in January 2012 and is currently up to $1.98.


Estimates for 2013 have moved from $2.11 in November 2011 to a current level of $2.17. Given the recent momentum of bigger and better beats, it's a pretty safe bet that 2013 estimates will continue to move higher.

 

ATU has a mixed valuation picture. The stock trades are a discount to the industry average in terms of trailing twelve months price to earnings, and price to book. The discount of prior earnings is greater than the discount exhibited in price to book. The stock trades at a premium to the industry average in terms of forward price to earnings, with a 14 times multiple compared to the 11 times industry average. A premium is also seen in the price-to-sales metric, but it is not that significant.


A look at the price and consensus chart shows how earnings estimate expectations have risen over the last few years. Normally, when we see the stock below the earnings lines, it implies the stock is undervalued. A solid history of earnings beats added to the recent momentum of bigger beats. Coupled with a good valuation, it makes ATU just what aggressive growth investors are looking for.

 

Brian Bolan is an aggressive growth stock strategist for Zacks.com.


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