Through The Fly's Eyes: Actuant

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Actuant Corporation: Fluid Engineering Solutions

Whether it's tools, or complex engineered solutions, some outfits just know electro-hydraulic systems. A leader in devising applications useful to the heavy vehicle market is headquartered in Butler, Wisconsin.

Actuant Corporation (ATU) is engaged in the manufacture and marketing of industrial products and systems. Its Tools and Supplies group offers high-force hydraulic tools, electrical tools and electrical consumables to the general industrial, construction, production automation and do-it-yourself retail markets. Its Engineered Solutions group provides motion control systems for the heavy-duty truck market. These include recreational vehicle slide-outs and leveling systems, heavy truck cab-tilt systems and electro-hydraulic convertible top actuation systems. Eaton Corporation (ETN) is a major competitor.

The ATU price popped early last week, when Bear Stearns upgraded its recommendation on the stock to "outperform" and issued a $72 price target. Shares kept going, when the company subsequently reported Q3 EPS of 96 cents and revenues of $385.1 million. Analysts had been expecting 93 cents and $366.17 million. Management also guided Q4 EPS to 90-95 cents (95 cent consensus), FY07 EPS to $3.38-$3.43 ($3.40 consensus), FY07 revenues to $1.43-$1.44 billion ($1.41B consensus), FY08 EPS to $3.70-$3.90 ($3.86 consensus) and FY08 revenues to $1.53-$1.55 billion ($1.50B consensus). Since then, the price has begun to define a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with two "strong buys", two "buys" and five "holds". The ATU P/E ratio (19.42), PEG ratio (1.34), Price to Sales ratio (1.22), Price to Book ratio (3.74), Price to Cash Flow ratio (12.81), Price to Free Cash Flow ratio (12.60), Sales Growth rate (21.59%), EPS Growth rate (23.08%) and Return on Equity (25.14%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 95 percent of the outstanding shares. Over the past 52 weeks, the stock has traded between $42.31 and $63.58. A stop-loss of $54.50 looks good here.