Enerpac Tool (EPAC) Gains From Product Demand Amid Cost Woes
Enerpac Tool Group Corp. EPAC specializes in manufacturing and distributing industrial tools as well as providing related services. Its product offerings include hydraulic torque wrenches, heavy-lifting technology solutions, and connectors for oil and gas. End-market strength and product launches are beneficial, while cost inflation and supply-chain restrictions are concerning for the company.
The Menomonee Falls, WI-based company presently carries a Zacks Rank #4 (Sell). The stock belongs to the Zacks Manufacturing –Tools & Related Products industry, which comes under the ambit of the Zacks Industrial Products sector. The industry is in the bottom11% (with a rank of 225) of more than 250 Zacks industries.
In the past three months,the company’s shares have gained 1.2% compared with the industry’s growth of 2.1%. Also, the S&P 500 and the sector have risen 2.7% and 2.5%, respectively, in the same period.
Image Source: Zacks Investment Research
Factors Influencing Enerpac Tool
Business operations in multiple end markets help Enerpac Tool lower risks from too much dependence on a single or few markets. Its exposure is notable in the industrial, production automation, mining, and energy markets. A solid product line, innovation capabilities, healthy demand and commercial efficiency add to the company’s growth prospects. In fiscal 2021 (ended August 2021), the company unveiled 15 product families.
Enerpac Tool’s focus on rewarding shareholders handsomely and business expansion through the addition of assets are also advantageous. The company anticipates revenues of $590-$610 million for fiscal 2022 (ending August 2022), suggesting a rise from $528.7 million reported in fiscal 2021. Core sales for Industrial Tools & Services’ products are anticipated to grow in the mid-teen percentage, higher than low-to-mid teens stated previously.
On a segmental basis, core sales are anticipated to increase in the mid-single-digit percentage for Industrial Tools & Services segment and the low-20% to high-30% for Other segment. The projections are higher than the low-single-digit percentage stated previously for Industrial Tools & Services and low-20% to mid-30% for Other segment.
On the flip side, Enerpac is facing cost and margin-related headwinds. In first-quarter fiscal 2022 (ended November 2021), the company recorded an 11.1% increase in the cost of sales and a 10.9% growth in selling, administrative and engineering expenses.The gross margin in the quarter decreased 70 basis points (bps) year over year. In the first half of fiscal 2022, the company expects pressure on margins from supply-chain issues, logistics problems, and cost-inflationary pressures. Effective pricing actions are likely to be a relief.
The company is exposed to risks from international operations. Businesses in the Americas/Europe region are facing hurdles from the pandemic-related restrictions (or lockdowns), while labor issues are influencing businesses in the Middle East, North Africa and Caspian regions.
The Zacks Consensus Estimate for Enerpac’s earnings per share is pegged at 95 cents for fiscal 2022 and $1.12 for fiscal 2023 (ending August 2022), suggesting declines of 3.1% and growth of 3.7%, respectively, from the respective 60-day-ago figures. The earnings estimate for the second quarter of fiscal 2022 (ending February 2022) is pegged at 13 cents, down 40.9% from the 60-day-ago figure.
Enerpac Tool Group Corp. Price and Consensus
Enerpac Tool Group Corp. price-consensus-chart | Enerpac Tool Group Corp. Quote
Stocks to Consider
Three better-ranked stocks from the sector are mentioned below.
Stanley Black & Decker, Inc.’s SWK results in the last reported quarter were impressive, with an earnings beat of 12.15%. The company presently carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Stanley Black’s earnings has increased 1.6% for 2022 in the past 60 days. SWK’s shares have gained 4.5% in the past three months.
Graco Inc. GGG presently carries a Zacks Rank #2. The company’s earnings surprise in the last reported quarter was -10.94%. The same for the last four quarters was 6.58%, on average.
In the past 60 days, the Zacks Consensus Estimate for Graco’s earnings has increased 1.9% for 2022. GGG’s shares have rallied 4.3% in the past three months.
Alta Equipment Group Inc. ALTG reported weaker-than-expected results in the last reported quarter, with earnings lagging estimates by 50.00%. Its earnings surprise in the last four quarters was -38.62%, on average. The company presently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Alta Equipment’s earnings has increased 5.3% for 2022 in the past 60 days. ALTG’s shares have rallied 8.3% in the past three months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Stanley Black & Decker, Inc. (SWK) : Free Stock Analysis Report
Graco Inc. (GGG) : Free Stock Analysis Report
Enerpac Tool Group Corp. (EPAC) : Free Stock Analysis Report
Alta Equipment Group Inc. (ALTG) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research