Actuant Corp (ATU) is on a roll as shares continue to climb following the sixth consecutive earnings surprise. Analysts have unanimously raised their estimates and are projecting fantastic growth rates over the next 2 years.
Now, the valuations are just average, but given the industry comparisons, growth rate and the momentum in the share price, this Zacks #1 Rank (Strong Buy) has a very bright future.
Company Description
Actuant is an industrial company that operates in over 30 countries through a variety of markets. The company offers hydraulic and electrical tools, as well as other related products and services.
EPS Rises 82%
On Sep 29 Actuant reported an 82% jump in earnings per share, to 31 cents. The results topped the Zacks Consensus Estimate by 3 cents, marking the sixth consecutive earnings surprise. A year ago, EPS came in at 18 cents.
Sales were up 19% to $310 million, with the majority coming through organic growth and a 4% increase attributed to acquisitions. Actuant’s adjusted profit margin also improved, up 130 bps to 25.4%.
Bullish Outlook
In the same press release, Actuant raised its full year outlook for 2011. Predicting cyclical rebounds in several areas, the company now expected EPS to fall between $1.30 and $1.45. The high end translates to a 35% annual growth rate. Sales are expected to climb between 6% and 10%
Analysts Agree
The Zacks Consensus Estimate jumped a dime for fiscal 2011, and now comes in at $1.41. Next year’s forecasts average $1.64, a 6 cent increase. These marks represent annual growth rates of 31% and 16%, respectively.
Every single new estimate that came in was higher than the analysts’ original projection.
Valuations & Comparisons
Actuant’s valuations are not the main draw here, but they are better or inline with their peers in most aspects. The forward P/E is about 16 times, the PEG is 1.2 and the price to sales is 1.28.
However, the financials are well ahead of the industry average. Actuant operates with a net profit margin of 1.9%, compared to a net loss of 0.3% which its peers average. The return on equity is just under 10%, compared to the norm of 0.3%.
The Chart
Shares of ATU continue to march higher and are now at the highest level in several years. Given the optimism from analysts and the overall market, I would not be afraid to get into the stock at this level.
Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service
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