Acuant Signals Acquisition on the Horizon

Actuant (ATU) released earnings and pronounced them to be record breakers.  Full-year 2008 revenues were a record $1.66 billion, a 14% increase over the prior year.Q4 revenues increased 4% year-over-year, to $405 million. (Call Transcript)

Record full-year diluted earnings per share [EPS] of $2.05, excluding special items, an increase of 18% over the comparable 2007 figure. Q4 EPS increased 10% year-over-year, excluding special items, to $0.54 .

The telling comment is when Robert C. Arzbaecher, President and CEO of Actuant commented:

We expect 2009 to be a challenging year given the unsettled economic and credit environments and headwinds from the stronger US dollar and higher borrowing costs. While we believe market conditions have become more difficult in the last 90 days, we feel the Company is well positioned given the focused execution of our business model and our increasingly diversified end markets and geographies. In addition, we are optimistic about acquisition opportunities and the potential they could have on fiscal 2009 results.

The questions this raises is:

1. What about organic growth? What role will this play in the company’s fortunes? Is there a negative signal here?
2. Is this a conglomerate waiting to happen? Rapid acquisitions are usually fraught with integration issues? If it plans on buying distress situations can it fix the problems? Remember, this company is already carrying some debt. Will its stock be an adequate currency?

Disclosure: None

Comments

[Maybe4Less:]

In regard to question 2, the author seems to imply that Actuant is not a conglomerate currently and is unfamiliar with acquisitions. Essentially, Actuant's whole growth strategy is to make small bolt-on acquisitions and roll-ups, which they have been doing for years. The company already has many characteristics of a conglomerate.

2008 Oct 03 02:46 AM