Atlas Copco on Buyout Spree, to Acquire Hy-Performance Fluid

Atlas Copco AB ATLKY, on Jan 10, announced that it will acquire Australia-based Hy-Performance Fluid Power Pty Ltd. Financial consideration of the buyout was not disclosed. Since the announcement, the price of the company’s American Depository Receipts (ADR) have increased 2.5%. The ADR price was $47.10 at the close of trading on Jan 12.

Hy-Performance Fluid primarily provides its services — remanufacturing, repair and servicing of hydraulic components — to customers in the mining and infrastructure end markets. In the fiscal year ending Jun 30, 2017, the firm had 26 employees and generated revenues of A$7.5 million.

The buyout of Hy-Performance Fluid will strengthen Atlas Copco’s product line for customers in the mining and infrastructure markets. It will be integrated with the company’s existing Mining and Rock Excavation Technique business. Notably, in calendar 2017, the company had communicated its intention of spinning-off its mining operations into a new company named Epiroc. Pending shareholders approval, the spin-off will be done in calendar 2018.

The above-mentioned transaction is consistent with Atlas Copco’s policy of acquiring meaningful businesses to gain access to new customers, regions and product line. Earlier in the same month, the company had announced the completion of the acquisition of U.S.-based mining equipment distributor Cate Drilling Solutions LLC, Australia-based Rockdrill Services Australia Pty. Ltd. and South Africa-based mining consumables provider Renegade Drilling Supplies Proprietary Ltd. The assets acquired will be integrated with the company’s Mining and Rock Excavation Technique business.

In December 2017, Atlas Copco announced that it will acquire France-based Location Thermique Service SAS. Upon the completion of the transaction in first-quarter of calendar 2018, Location Thermique Service — engaged in renting steam boiler to customers in the chemical, power, oil & gas and manufacturing end markets — will be integrated with the company’s Power Technique business.

Also, Atlas Copco believes in disposing non-core assets to enhance its business opportunities from the more profitable ones. In this regard, the company’s plan of divesting its concrete and compaction operations from the Power Technique business is worth mentioning. The transaction is anticipated to be complete in the first quarter of calendar 2018.

In the last three months, Atlas Copco shares have yielded 13.7% return, outperforming 9.7% gain recorded by the industry it belongs.

Zacks Rank & Other Stocks to Consider

With a market capitalization of nearly $55.3 billion, Atlas Copco currently carries a Zacks Rank #2 (Buy). Also, the stock has a VGM Score of B. Earnings estimates for the stock for 2018 has been increased by one brokerage firm in the last 60 days. It is pegged at $1.94, reflecting growth of 3.2% from the tally 60 days ago.

Other stocks worth considering in the industry are Sun Hydraulics Corporation SNHY, Barnes Group, Inc. B and Colfax Corporation CFX. While Sun Hydraulics sports a Zacks Rank #1 (Strong Buy), both Barnes Group and Colfax carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sun Hydraulics’ earnings estimates for 2018 have remained stable in the last 60 days. Also, the company pulled off an average positive earnings surprise of 9.58% in the last four quarters.

Barnes Group delivered an average positive earnings surprise of 9.02% in the last four quarters. Its earnings expectations for 2018 have improved over the past 60 days.

Colfax’s earnings estimates for 2018 were revised upward in the last 60 days. Also, it delivered an average positive earnings surprise of 5.31% in the last four quarters.

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