Altra Industrial Motion Hit Hard By Adverse End-Market Exposures And Near-Term Margin Weakness

 

Even allowing for some challenges in the linear motion market and Altra’s (AIMC) particular end-market exposures, I’m surprised that Altra’s share price has been as weak as it has been. Down more than a third since my last update, Altra has significantly underperformed the wider industrial sector, as well as partial comparables like Regal Rexnord (RRX) and RBC Bearings (ROLL), though the latter’s performance was tracking pretty closely to Altra’s before fourth quarter earnings.

I can understand caution with Altra’s meaningful exposure to short-cycle markets (“distribution”), heavy vehicle, medical, and wind power markets, but I think the company’s leverage to factory and warehouse automation, ag & construction, food/beverage, packaging, and improving aerospace should be worth more than this. The sale of Jacobs does lower my long-term revenue growth rate to around 4%, but that, combined with longer-term margin improvement should still be enough to support a fair value well above today’s price.

 

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Altra Industrial Motion Hit Hard By Adverse End-Market Exposures And Near-Term Margin Weakness