Sun Hydraulics Corporation (NASDAQ:SNHY) yesterday announced that it has signed an agreement with Capvis Equity IV LP to acquire Milan, Italy-based Faster Group from the latter. The transaction value is estimated at €430 million or roughly $531 million in cash.
Faster Group specializes in manufacturing quick-release couplings, especially those for hydraulics. Its products are mainly used by customers in the general industrial, agriculture and construction end markets. It carries its manufacturing operations with over 475 employees in Italy, Ohio and India and has sales offices in China, Brazil and Germany.
In 2017, Faster Group generated approximately €105 million or $130 million revenues and had adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 27.5%. Revenues are projected to grow 16-16.5% year over year in 2018, while EBITDA margin is likely to be flat.
In the last six months, Sun Hydraulics’ shares have increased 19.5%, outperforming 17.1% gain recorded by the industry.
Details of the Buyout
As disclosed, machinery company Sun Hydraulics will fund the acquisition value with roughly $161 million available from cash-in-hand and $370 million raised from revolving credit facility.
The Faster Group buyout is in sync with Sun Hydraulics’ Vision 2025 and is anticipated to strengthen business portfolio and create business opportunities in the industrial goods market. Deeper penetration in the agricultural end market will also be possible. The company believes that this buyout will be accretive to its earnings (GAAP) in 2018 and forward.
Subject to fulfillment of customary closing conditions, Sun Hydraulics anticipates completing the acquisition in second-quarter 2018.
Zacks Rank & Stocks to Consider
With a market capitalization of nearly $1.7 billion, Sun Hydraulics currently carries a Zacks Rank #3 (Hold).
Sun Hydraulics is working diligently to improve its product portfolio to serve its customers better. It aims to improve its operational execution, product development and market penetration. Its revenues are anticipated to be within $330-$340 million in 2017 (results to be released on Feb 26), including $225-$230 million from the Hydraulics and $105-$110 million from the Electronics segments.
In the last 60 days, the Zacks Consensus Estimate for the stock grew roughly 1.1% to $1.92 for 2018. The estimate for fourth-quarter 2017 is at 24 cents.
Sun Hydraulics Corporation Price and Consensus
Sun Hydraulics Corporation Price and Consensus | Sun Hydraulics Corporation Quote
Some better-ranked stocks in the industry include Applied Industrial Technologies, Inc. (NYSE:AIT) , Dover Corporation (NYSE:DOV) and Roper Technologies, Inc. (NYSE:ROP) . All these stocks sport a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies has pulled off an average positive earnings surprise of 10.97% over the last four quarters. Also, earnings estimates for fiscal 2018 (ending June 2018) and fiscal 2019 (ending June 2019) have been revised upward over the last 60 days.
Dover Corporation has delivered an average positive earnings surprise of 7.26% in the trailing four quarters. Also, bottom-line expectations for 2018 and 2019 have improved over the past 60 days.
Roper Technologies’ financial performance has been impressive, with an average positive earnings surprise of 3.12% in the last four quarters. Also, earnings estimates for 2018 and 2019 have been revised upward over the last 60 days.
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