Actuant (ATU) Tops Q3 EPS by 3c, Beats on Revenues; Updated FY18 EPS/Revenue Guidance Above Consensus, Boosts Sales Guidance

Actuant (NYSE: ATU) reported Q3 EPS of $0.39, $0.03 better than the analyst estimate of $0.36. Revenue for the quarter came in at $317.1 million versus the consensus estimate of $306.48 million.

Highlights

• Consolidated sales increased 7% over the comparable prior year quarter with a 4% benefit from foreign currency rate changes and a 1% reduction associated with net acquisitions and divestitures. Third quarter core sales (total sales excluding the impact of acquisitions, divestitures and foreign currency rate changes) increased 4% on a year-over-year basis with strong volumes in both the Engineered Solutions and Industrial segments.
• GAAP diluted earnings per share (“EPS”) was $0.48 in the third quarter of fiscal 2018 versus $0.37 in the prior year. Excluding third quarter fiscal 2018 one-time items, adjusted EPS was $0.39 (see Consolidated Results below, along with the attached reconciliation of earnings).
• Strong operating cash flow generation and reduction in net leverage improves capital allocation liquidity.
• Acquired Equalizer, a small tool product line tuck-in to expand pipe and flange alignment capabilities.
• Full year fiscal 2018 sales and adjusted EPS guidance updated to $1.17-1.18 billion and $1.03-1.08 (excluding one-time items), respectively.

Randy Baker, President and CEO of Actuant commented, “I’m pleased with Actuant’s performance in the third quarter, delivering both solid sales and earnings growth. We continue to see strong momentum in the industrial tools and OEM component businesses, and global Energy maintenance activity appears to have stabilized. While we continue to experience some pressures from inflation along with commercial and engineering investments to support high service levels and growth, we are realizing the incremental margin benefits of higher volumes and restructuring actions. In summary, I am encouraged by this quarter’s performance and our team’s ability to capitalize on the broad based strong economic backdrop. I want to thank our employees across the globe for their continued commitment and execution.”

Outlook

Baker continued, "I believe our third quarter results demonstrate that we are on the path toward higher structural sales and margin performance, and we expect to further build on these solid results. This underlying performance, combined with anticipated improvement in energy maintenance activity levels, effectively managing the inflationary environment and our expected continued progress in new product launches, we believe positions us well to deliver on our 2018 full year guidance.

With one quarter to go in the fiscal year, we are increasing our full year sales guidance and narrowing our adjusted EPS guidance range to reflect our performance to date and the latest outlook for the remainder of the year. For the fourth quarter, we anticipate sales will be in the $290-300 million range reflecting normal seasonal moderation from the third quarter. Fourth quarter adjusted EPS is expected to be in the range of $0.32-0.37. This includes core sales growth of approximately 3-5% and a mid-single digit effective income tax rate. This would bring our full year sales and adjusted EPS guidance to a range of $1.17-1.18 billion and $1.03-1.08, respectively. Free cash flow is expected to be in the $70-75 million range and would represent greater than 100% earnings conversion.”

Baker concluded, “The global economy and our markets continue to show strength, and our growth initiatives are taking hold. By working to improve our commercial effectiveness and speed to market, enhance our lean execution and complete critical portfolio management actions, we believe we will be well positioned to drive significant long-term value for our customers, employees and shareholders.”

GUIDANCE:

Actuant sees FY2018 EPS of $1.03-$1.08, versus the consensus of $1.02. Actuant sees FY2018 revenue of $1.17-1.18 billion, versus the consensus of $1.15 billion.

For earnings history and earnings-related data on Actuant (ATU) click here.

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