Enerpac (EPAC) up 2.5% since last earnings report: can it continue?

A months have passed since the last Enerpac Results Report (EPAC). Stocks rose about 2.5% during that time, underperforming the S&P 500.

Will the recent positive trend continue until its next results release, or is Enerpac likely to suffer a setback? Before we dive into how investors and analysts have reacted in recent times, let’s take a look at the latest earnings report to better understand the important catalysts.

Enerpac Tool Lags Fourth Quarter Earnings and Sales Estimates

Enerpac Tool reported weaker-than-expected results for the fourth quarter of fiscal 2021 (ended August 31, 2021). Its profit and surprise sales were -20.83% and -3.02% respectively.

The company’s adjusted earnings per share in the reported quarter were 19 cents, behind Zacks’ consensus estimate of 24 cents. However, net income improved from a profit of 2 cents per share in the quarter of last year thanks to strong revenue generation, improved margins and low taxes.

For fiscal 2021, the company’s adjusted profit was 63 cents per share, behind the Zacks consensus estimate of 67 cents. Compared to the figure published a year ago, the net result increased by 250%.

Income Details

In the reported quarter, the company’s revenue was $ 145.4 million, reflecting growth of 30.5% over the figure for the previous year quarter. Revenue was generated from the strengthening of segment activities.

The top line was lower than Zacks’ consensus estimate of $ 150 million. Additionally, revenue was lower than the company’s projection of $ 147 million to $ 152 million, mainly due to logistics, supply chain and bottlenecks related to a pandemic.

Organic sales in the quarter under review increased 28% year-over-year, driven by 55% growth in service revenues and a 23% increase in product sales. Currency movements had a positive impact of 3% on results.

Segmental information is briefly discussed below.

Industrial Tools and Services: Revenue for the reported quarter totaled $ 134.8 million, reflecting a 30.8% increase over the previous year. Core segment sales increased 28%, while foreign currency conversion had a positive impact of 3%. This year-over-year revenue growth was driven by the recovery in the global market.

Other: Sector revenues totaled $ 10.6 million, up 27.8% from the prior year quarter.

For fiscal 2021, the company’s revenue was $ 528.7 million, an increase of 7.2% from the previous year. The top line was 0.84% ​​behind Zacks’ consensus estimate of $ 533.2 million.

Margin Profile

During the current quarter, Enerpac Tool cost of sales increased 18.3% year-over-year to $ 79.2 million. It represented 54.4% of net sales for the quarter reported against 60.1% in the quarter of the previous year. Gross profit increased 49% year-on-year to $ 66.3 million. Gross margin increased 560 basis points year-on-year to 45.6%. Selling, administrative and engineering expenses increased 20% year-over-year to $ 45.2 million.

EBITDA was $ 24.2 million, up 131.7% year-over-year. The adjusted EBITDA margin was 16.6% compared to 9.4% in the previous year quarter.

Adjusted operating income was $ 19.3 million for the quarter presented, reflecting an improvement over the $ 4.6 million generated in the previous year quarter. The adjusted operating margin for the quarter under review was 13.2% compared to 4.2% in the quarter of the previous year. Net financing costs decreased 73.7% year over year to $ 0.9 million.

The effective income tax during the quarter was 36%, lower than the 51% in the quarter of the previous year.

Balance sheet and cash flow

At the end of the fourth quarter of fiscal 2021, Enerpac Tool’s cash and cash equivalents totaled $ 140.4 million, up 3% from $ 136.3 million at the end of the fiscal year. last trimestre. Long-term debt decreased 10.3% sequentially to $ 175 million.

During the current quarter, the company repaid $ 20 million in term loans. Its net debt to adjusted EBITDA ratio was 0.6X at the end of the fiscal fourth quarter compared to 1.1X at the end of the third quarter.

Enerpac Tool generated net cash of $ 29.3 million from its operating activities in the fourth quarter of fiscal 2021, up 133.5% year-over-year. Capital expenditures totaled $ 2.5 million, down 8.4% year over year. Free cash flow in the current quarter was $ 27 million, up 172.9% year-over-year.

In fiscal 2021, the company refrained from repurchasing its shares, while paying cash dividends of $ 2.4 million.

Outlook

Enerpac Tool expects to take advantage of the global market recovery. He believes product development, organic outlook and buyout gains will be beneficial in the quarters to come. Supply chain restrictions, closures related to COVID-19, high commodity costs and logistics issues are headwinds for the company.

For fiscal 2022 (ending August 2022), Enerpac Tool is forecasting sales of $ 590-610 million, more than the $ 528.7 million a year ago. Incrementally adjusted EBITDA is expected to be 35-45% during the year.

How have the estimates evolved since then?

Analysts have remained calm over the past two months, with none of them issuing revisions to their earnings estimates.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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