MTS Systems Q4 Profit Up 40%, Beats Estimates; But Sees 2014 Earnings Below View

(RTTNews) - MTS Systems Corp. (MTSC), a supplier of test systems and industrial position sensors, on Thursday reported a 40 percent increase in profit for the fourth quarter from last year on double-digit revenue growth and higher margins. Earnings per share beat analysts' estimates. Looking ahead, the company forecast earnings per share for fiscal 2014 below Street expectations.

Dr. Jeffrey Graves, President and Chief Executive Officer of MTS Systems said, "Orders were up 9 percent, revenue grew 12 percent, and earnings per share climbed 45 percent. Driving these quarterly gains was double-digit growth in revenue and income from operations in both Test and Sensors. We delivered a strong finish to fiscal 2013, in line with our expectations, and expect continued growth in fiscal 2014."

The company's orders for the fourth quarter increased 9 percent from the year-ago period to $160.2 million, net of a 1 percent negative currency translation. The increase was driven by 25 percent base-order growth in the Test segment, partially offset by variability in large-order timing, and 13 percent growth in the Sensors segment.

MTS System's backlog of $290 million at the end of the quarter decreased 3 percent compared to the prior year.

MTS Systems' net income for the fourth quarter was $21.42 million or $1.36 per share, up from $15.25 million or $0.94 per share in the year-ago period. Two analysts polled by Thomson Reuters expected the company to report earnings of $1.11 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter increased 12 percent to $154.80 million from $137.84 million in the same period last year.

Gross margin rose 150 basis points from last year to 43.2 percent, while operating margin increased 230 basis points to 18.0 percent.

The tax rate for the quarter fell to 21.9 percent from 28.6 percent, primarily from an approximate 7.3 percentage point favorable impact due to recently issued guidance related to the United States Research and Development tax credit. This provided a tax benefit in the latest quarter of $2.0 million, or $0.12 per share, positively impacting the earnings per share growth rate by 13 percentage points.

For fiscal 2013, MTS Systems' net income increased to $57.81 million or $3.64 per share from $51.56 million or $3.21 per share in the previous year.

Excluding the $0.48 per share negative impact from the U.S. Government settlement costs last year, earnings per share declined 1 percent. Fewer shares outstanding positively impacted earnings per share by $0.04 in the latest year. Analysts expected the company to earn $3.40 per share for the year.

Revenue for the year increased 5 percent to $569.44 million from $542.26 million in the prior year.

Looking ahead to the first quarter, MTS Systems forecast adjusted earnings in a range of $0.65 to $0.75 per share, with revenues ranging between $139 million and $144 million.

For fiscal 2014, MTS Systems forecasts earnings, excluding restructuring costs of $4 million to $6 million, in a range of $3.55 to $3.70 per share and revenues in a range of $585 million to $605 million. Street expects the company to report earnings of $4.35 per share for the year.

The company expects productivity benefits from investments in business processes to result in cost savings of $4 million to $5 million in fiscal 2014.

Dr. Graves said, "From an economic perspective, we are anticipating global economic conditions to modestly improve, which should result in another record year in fiscal 2014 including mid-single-digit orders growth, a marked increase compared to fiscal 2013."

MTSC closed Thursday's regular trading at $65.32, down $0.44 or 0.67 percent on a volume of 59,815 shares. In after-hours, the stock further declined $1.33 or 2.04 percent to $63.99.