Allient’s (NASDAQ:ALNT) Q4: Beats On Revenue

Precision motion systems specialist Allient (NASDAQ:ALNT) beat Wall Street’s revenue expectations in Q4 CY2024, but sales fell by 13.5% year on year to $122 million. Its GAAP profit of $0.18 per share was significantly above analysts’ consensus estimates.

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Company Overview

Founded in 1962, Allient (NASDAQ:ALNT) develops and manufactures precision and specialty-controlled motion components and systems.

Electronic Components

Like many equipment and component manufacturers, electronic components companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include data centers and telecommunications, which can benefit companies whose optical and transceiver offerings fit those markets. But like the broader industrials sector, these companies are also at the whim of economic cycles. Consumer spending, for example, can greatly impact these companies’ volumes.

Sales Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Allient grew its sales at a mediocre 7.4% compounded annual growth rate. This was below our standard for the industrials sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Allient’s recent history shows its demand has slowed as its annualized revenue growth of 2.6% over the last two years was below its five-year trend.

This quarter, Allient’s revenue fell by 13.5% year on year to $122 million but beat Wall Street’s estimates by 1.9%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Allient was profitable over the last five years but held back by its large cost base. Its average operating margin of 6.8% was weak for an industrials business.

Looking at the trend in its profitability, Allient’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Allient generated an operating profit margin of 5.3%, down 1.2 percentage points year on year. The reduction is quite minuscule and shareholders shouldn’t weigh the results too heavily.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Allient, its EPS declined by 7.9% annually over the last five years while its revenue grew by 7.4%. However, its operating margin didn’t change during this time, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.

Diving into the nuances of Allient’s earnings can give us a better understanding of its performance. A five-year view shows Allient has diluted its shareholders, growing its share count by 18%. This has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Allient, its two-year annual EPS declines of 14.3% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, Allient reported EPS at $0.18, down from $0.26 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Allient’s full-year EPS of $0.80 to grow 30%.

Key Takeaways from Allient’s Q4 Results

We were impressed by how significantly Allient blew past analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good quarter with some key areas of upside. The stock traded up 2.6% to $24.41 immediately following the results.

Indeed, Allient had a rock-solid quarterly earnings result, but is this stock a good investment here? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.