Enerpac Tool (EPAC) Q1 Earnings Miss Estimates, Increase Y/Y (Revised)

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Enerpac Tool Group (NYSE:) Corp. EPAC delivered weaker-than-expected results for first-quarter fiscal 2022 (ended Nov 30, 2021). Earnings in the quarter lagged estimates by 23.8% while revenues missed the same by 6.8%.

The company’s adjusted earnings per share in the reported quarter were 16 cents, lagging the Zacks Consensus Estimate of 21 cents. However, the bottom line increased 77.8% from earnings of 9 cents per share in the year-ago quarter on the back of revenue growth. The prevalent supply-chain, inflation and logistics woes were spoilsports.

Revenue Details

In the reported quarter, the company’s revenues were $130.9 million, reflecting 9.6% increase from the year-ago quarter’s figure. The top line gained from healthy performance at Industrial Tools & Services and Other segments.

The top line lagged the Zacks Consensus Estimate of $140.5 million.

Organic sales in the quarter under review were up 9% year over year, driven by 14% growth in product sales. Service revenues in the quarter played spoilsport, decreasing 3% year over year. Movements in foreign currency had minimal impacts on the quarter’s revenues.

The segmental information is briefly discussed below.

Industrial Tools & Services (92.7% of first-quarter fiscal 2022 net sales): Revenues in the reported quarter totaled $121.3 million, reflecting an 8.1% increase from the year-ago figure. The year-over-year growth in revenues was driven by market recovery worldwide and the impacts of pricing actions taken by the company.

Other (7.3% of net sales in first-quarter fiscal 2022): Revenues in the segment totaled $9.6 million, up 32.2% from the year-ago quarter.

Margin Profile

In the reported quarter, Enerpac Tool’s cost of sales grew 11.1% year over year to $71.3 million. It represented 54.5% of the reported quarter’s net sales compared with 53.7% in the year-ago quarter. The gross profit increased 7.9% year over year to $59.6 million. The gross margin decreased 70 basis points year over year to 45.6%.

The gross profit results in the quarter suffered from impacts of inflationary, supply-chain and logistics woes.

Selling, administrative and engineering expenses increased 10.9% year over year to $48.5 million. Adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) were $17.6 million, up 20.5% year over year. The adjusted EBITDA margin was 13.4% compared with 12.2% in the year-ago quarter.

Adjusted operating income was $12.9 million in the reported quarter, reflecting an improvement from $9.4 million generated in the year-ago quarter. The adjusted operating margin in the quarter under review was 9.9% compared with 7.9% in the year-ago quarter. Net financing costs declined 44% year over year to $1 million.

Balance Sheet and Cash Flow

Exiting first-quarter fiscal 2022, Enerpac Tool’s cash and cash equivalents totaled $126.5 million, down 9.9% from $140.4 million at the end of the last-reported quarter. Long-term debt was stable sequentially at $175 million.

In the reported quarter, the company repaid $5 million of revolving credit facility, and its borrowing from the same source was $5 million. Its net debt to adjusted EBITDA was 0.7X at the end of the fiscal first quarter versus 0.6X at fourth-quarter end.

Enerpac Tool used net cash of $4.7 million for its operating activities in the first quarter of fiscal 2022. It generated net operating cash of $8.7 million in the year-ago quarter. Capital spending totaled $3.3 million, up 72.9% year over year. Free cash outflow in the reported quarter was $7.9 million compared with cash inflow of $6.8 million in the year-ago quarter.

In the quarter, the company paid out cash dividends of $2.4 million.

Outlook

Enerpac Tool anticipates healthy demand and focus on growth to be beneficial in fiscal 2022 (ending August 2022). However, headwinds related to cost inflation, supply-chain woes and logistics issues continue to be concerning.

For fiscal 2022, Enerpac Tool maintained its sales projection of $590-$610 million. It represents an increase from the year-ago tally of $528.7 million. Incremental adjusted EBITDA is expected to be 35-45% (maintained).

Enerpac Tool Group Corp. Price, Consensus and EPS Surprise

Enerpac Tool Group Corp. Price, Consensus and EPS Surprise

Enerpac Tool Group Corp. Price, Consensus and EPS Surprise

Enerpac Tool Group Corp. price-consensus-eps-surprise-chart | Enerpac Tool Group Corp. Quote

Zacks Rank & Stocks to Consider

With market capitalization of $1.3 billion, Enerpac Tool currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Zacks Industrial Products sector are discussed below.

Helios Technologies (NYSE:), Inc. HLIO presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings beat in the last-reported quarter was 30.49%. The average earnings beat in the last four quarters was 37.54%, on average.

In the past 60 days, Helios’ earnings estimates have increased 7.9% for 2021 and 9.6% for 2022. HLIO’s shares have gained 9.6% in the past three months.

Ingersoll Rand (NYSE:) Inc. IR reported better-than-expected results in the last reported quarter, with earnings surpassing estimates by 23.91%. Its earnings surprise in the last four quarters was 19.78%, on average. The company presently carries a Zacks Rank #2 (Buy).

Ingersoll’s earnings estimates increased 11.7% for 2021 and 7.9% for 2022 in the past 60 days. IR’s shares have increased 9.4% in the past three months.

Applied Industrial Technologies, Inc.’s AIT results in the last-reported quarter were impressive, with earnings surpassing estimates by 14.29%. Its last four-quarter average earnings surprise was 26.71%. The company presently carries a Zacks Rank #2.

Applied Industrial’s earnings estimates have increased 1.9% for fiscal 2022 (ending June 2022) and 2.2% for fiscal 2023 (ending June 2023) in the past 60 days. AIT’s shares have gained 13.8% in the past three months.

(We are reissuing this article to correct a mistake. The original article, issued on December 21, 2021, should no longer be relied upon.)

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