I don't envy the job facing Hurco's (NASDAQ:HURC) managers today. I believe that this small industrial company remains a very overlooked manufacturer of high quality high-spec machine tools, but that is a very tough business to be in these days. As I've written in past pieces on companies like MSC Industrial (NYSE:MSM), demand for cutting and metalworking tools has plunged in the U.S. during this industrial slowdown and demand appears to be even worse in Asia.
I still believe that patience will pay with the stock. The company has released an interesting new control console (Max 5) and the acquisition of Milltronics and Takumi meaningfully expands both the company's product lines and geographic exposures. A machine tool company is a quintessentially cyclical company, but Hurco does look undervalued to me today.
A Mixed, But Generally Good, Set Of Results
Although the North American market has gotten ugly at a fast pace, Hurco delivered a set of fiscal fourth quarter results that were better than I'd expected in most respects. While some readers may regard it as self-aggrandizing that I compare Hurco's results to my own model, there is no sell-side coverage that I'm aware of to use as an alternative benchmark.
Hurco's reported revenue rose more than 5% in this final quarter, rising 14% in constant currency but declining 0.5% in organic constant currency terms. The end result number was about 9% higher than my projection, with the core organic business falling off less than I'd feared.
On a regional basis, North American sales fell 1.5% organically, but rose 27% as reported due to the addition of Milltronics. Sales in Europe were down 9% as reported, but up 4% in constant currency. Sales to Asia-Pacific were up 28% as reported, but down 28% on an organic constant currency basis.
Gross
