Altra Lifts 2020 Outlook On 3Q Beat; Shares Spike 11%

Shares of Altra Industrial Motion closed 10.8% higher on Friday after the company ramped up its 2020 outlook following better-than-expected 3Q results.

The manufacturer of electromechanical power transmission control and automation products reported adjusted EPS of $0.87 that jumped 26.1% year-over-year and surpassed analysts’ expectations of $0.46. Altra’s (AIMC) CEO Carl Christenson said, “Our aggressive cost-reduction actions led to excellent margin performance, strong cash flow generation and effective debt reduction.”

Altra’s 3Q revenues of $437.8 million beat Street estimates of $393.8 million. Quarterly revenues were down from the $442.9 million reported in the year-ago quarter. (See AIMC stock analysis on TipRanks).

Buoyed by better-than-expected 3Q results, Altra raised its 2020 outlook. The company now anticipates revenues in the range of $1.69-$1.71 billion, up from the earlier guidance range of $1.58-$1.64 billion. The company also lifted its adjusted EPS outlook from $2.05-$2.30 to $2.70-$2.82.

Following the company’s earnings announcement, Rosenblatt Securities analyst Scott Graham raised the stock’s price target to $50 (11.6% upside potential) from $42. In a note to investors on Oct. 25, Graham wrote, “We do see some restraints to margins over the next year but still expect margins to rise.” However, the analyst kept a Hold rating noting that the company’s current valuation multiple is well above the peers’ average.

Currently, the Street is bullish on the stock with a Strong Buy analyst consensus. With shares up nearly 24% year-to-date, the average price target of $48.75 implies further upside potential of about 8.8% to current levels.

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