Mid Cap Watch List member Actuant Corporation (NYSE:ATU) announced results for its third quarter ended May 31, 2007. Including restructuring charges, third quarter fiscal 2007 net earnings and diluted earnings per share [EPS] were $29.6 million and $0.95 respectively, compared to prior year net earnings, and EPS of $26.8 million and $0.86, respectively. Excluding a restructuring charge in 2007 and a prior year tax benefit, third quarter EPS increased 23% year-over-year from $0.78 to $0.96. The consensus among analysts following Actuant was that its earnings would be $0.93.
The better-than-expected earnings were driven by sales of $385 million, which was better than the $366 million analysts were expecting. According to the company:
Third quarter sales increased 22% to $385 million from $317 million in the prior year, reflecting the combination of core growth, business acquisitions and the weaker U.S. dollar. Excluding the impact of foreign currency rate changes (5%) and acquisitions (13%), core sales growth was 4%.
The core growth rate is pretty meager, and it is unclear to what extent the acquisitions and dollar weakness were being factored into the consensus estimate. Since the positive surprise amounted to 5% above consensus, it could be explained away by the declining dollar if analysts were expecting a stable one. At any rate, the way the core sales growth relates to analysts expectations will likely be the stronger driver of the stock today. Given that the 9-month core sales growth rate was 9% (and includes the current weaker quarter) it appears as though core growth is slowing significantly.
Also on investors’ minds today will be the guidance:
The Company updated its fiscal year 2007 guidance to reflect both the TTF acquisition and third quarter results. Full year fiscal 2007 EPS is expected to be in the range of $3.38-3.43 (excluding European Electrical restructuring charges) on sales of $1.430-1.440 billion. Fourth quarter EPS (excluding restructuring charges) is projected to be in the $0.90-0.95 range.
Actuant also provided its preliminary outlook for fiscal 2008, which reflects the continued execution of its dual strategy of organic growth and tuck-in business acquisitions. The company is targeting approximately 10-15% EPS growth (excluding future acquisitions), above the mid-point of its fiscal 2007 EPS guidance. Diluted EPS is projected to be in the $3.70-3.90 range, excluding European Electrical restructuring charges. The Company currently anticipates that next year’s sales will be in the $1.530-1.550 billion range, an increase of 6-8% over fiscal 2007.
Analyst expectations for Q4 are for $0.95, which will now have to come in a couple of cents. However, due to the positive surprise in the current quarter the full-year estimate still appears doable. For next year, analysts are expecting $1.5 billion in sales and $3.85 in earnings per share. However, these estimates may include some impact from the company’s acquisition strategy, whereas the company’s guidance does not.
ATU 1-yr chart