Enerpac Shares Plummet 9% Following Q3 Revenue Miss
Enerpac Tool Group Corp. recently reported its third-quarter earnings, and the results sent its stock tumbling by 9%. The company’s earnings per share (EPS) stood at $0.47, meeting analysts' expectations. However, its revenue fell short, registering $150.39 million, below the anticipated $155 million. This marks a 4% decrease compared to the same period last year.
Revenue and Sales Performance
In the third quarter of fiscal 2024, Enerpac experienced a drop in net sales due to selling off Cortland Industrial. However, it's worth noting that the company’s organic sales (sales made directly from ongoing operations) actually increased by 1.2% year-over-year.
The company also saw a gross margin improvement to 51.8%. This measure indicates profitability, showing an increase compared to the previous year. Enerpac credits this improvement to better pricing, a favorable sales mix, and strategic decisions, such as selling certain parts of their business.
Key Financial Metrics
- Operating Margin: Enerpac’s operating margin was 22.2%, with an adjusted operating margin (a profitability measure after some costs are removed) of 24.6%.
- Adjusted EBITDA: This term means Earnings Before Interest, Taxes, Depreciation, and Amortization. Enerpac’s adjusted EBITDA rose by 6% year-over-year to $40 million, with a margin of 26.4% compared to 24% the previous year.
Leadership's Insights
Enerpac’s President & CEO, Paul Sternlieb, praised the company’s emphasis on margin expansion by improving efficiency and productivity. Despite slower growth, Sternlieb remains confident in the company’s long-term financial and strategic goals.
Financial Outlook and Guidance
Enerpac has narrowed its forecast for organic revenue growth to 2% to 3% and increased the midpoint of its adjusted EBITDA guidance. The company now expects EBITDA for the year to range between $147 million to $150 million.
The company maintains a strong balance sheet with net debt to adjusted EBITDA at 0.5x, indicating low debt relative to earnings. This strong financial position supports their ASCEND program, aimed at shareholder value creation.
Future Projections
Looking ahead, Enerpac projects organic sales growth of approximately 2% to 3% for the full fiscal year, translating to net sales between $585 million to $590 million. The company’s updated guidance factors in a $5 million negative effect from new foreign exchange rate assumptions. However, their free cash flow guidance remains steady at $60 million to $70 million.
Conclusion
Enerpac faced a tough third quarter with a revenue miss, causing a 9% drop in stock value. However, the company showed improvements in key areas like gross margin and EBITDA, indicating solid operational efficiency. With a strong balance sheet and a clear strategic focus, Enerpac is poised for steady but slow growth moving forward.
