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Altra Industrial (AIMC) Tops Q2 Earnings, Revenues, Ups View

Machinery company Altra Industrial Motion Corporation AIMC reported impressive results for second-quarter 2017, with earnings and revenues surpassing their respective Zacks Consensus Estimate by 11.76% and 1.15%.

The quarter’s non-GAAP earnings of 57 cents per share topped the Zacks Consensus Estimate of 51 cents. Also, the bottom line increased 35.7% from the year-ago quarter’s tally of 42 cents.

Revenues totaled $223.4 million, increasing 22.3% year over year. The improvement was triggered by 4% growth in organic revenues and 18.3% positive impact from the Stromag acquisition.

Also, the top line was above the Zacks Consensus Estimate of $221 million.

Segmental Details

Altra Industrial Motion reports its revenues under the following heads/segments - Couplings Clutches & Brakes, Electromagnetic Clutches & Brakes, and Gearing. A brief snapshot of the segmental sales has been provided below:

Revenues generated from Electromagnetic Clutches & Brakes segment were $8.16 million, up 15.5% year over year.

Couplings Clutches & Brakes segment’s sales were $12 million, surging 58.9% from the year-ago quarter.

Gearing segment’s revenues inched up 0.1% year over year to $49.1 million.

Margins

In the quarter, Altra Industrial Motion’s margins profile improved on the back of revenue growth, partially offset by costs and operating expenses. Cost of sales increased 21.5% year over year while as a percentage of revenues it represented 67.7% versus 68.1% in the year-ago quarter. Gross margin improved 40 basis points (bps) to 32.3%. Selling, general and administrative expenses were roughly $41.6 million, accounting for 18.6% of revenues.

Non-GAAP operating margin in the quarter was 11.2% versus 10% in the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the second quarter, Altra Industrial Motion’s cash and cash equivalents were $59 million, up from $52.9 million in the preceding quarter. Long-term debt was $308 million, down 3% sequentially.

In the first half of 2017, the company’s net cash generated from operating activities fell roughly 15% year over year to $26 million. Capital spending was $14.4 million, up from $10.9 million in the year-ago period. During the period, the company paid dividends amounting to $8.3 million.

Outlook

For 2017, Altra Industrial Motion anticipates benefiting from the steadily improving end-markets, savings from cost-reduction initiatives and synergistic benefits from the Stromag acquisition. On the back of these expectations as well as impressive first-half results, the company increased its revenue guidance to $850–$865 million from the previous projection of $840–$855 million.

Non-GAAP earnings are anticipated to be within $1.95–$2.05 per share, up from the earlier forecast of $1.83–$1.93. Tax rate will be 29–31% while capital spending will be within $25–$30 million.      

Zacks Rank & Key Picks

With a market capitalization of $1.24 billion, Altra Industrial Motion currently sports a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the industry include Atlas Copco AB ATLKY, Barnes Group Inc. B and Parker-Hannifin Corporation PH. While Atlas Copco sports the same Zacks Rank as Altra Industrial, both Barnes Group and Parker-Hannifin carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Atlas Copco pulled off an average positive earnings surprise of 8.34% for the last four quarters. Also, its earnings estimates for 2017 and 2018 were revised upward over the last 60 days.

Barnes Group delivered an average positive earnings surprise of 8.94%. Also, earnings estimates for 2017 improved over the past 60 days.

Parker-Hannifin Corporation’ financial performance was impressive, with an average positive earnings surprise of 14.94% for the last four quarters. Also, earnings estimates for fiscal 2018 were revised upward over the last 60 days.

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