MTS SYSTEMS CORP. $64 (Nasdaq symbol MTSC; Aggressive Growth
Portfolio, Manufacturing & Industry sector; Shares outstanding: 15.6 million; Market cap: $998.4 million; Price-to-sales ratio: 1.9; Dividend yield: 1.9%; TSINetwork Rating: Average; www.mts.com) makes equipment and software that manufacturers use to test the behaviour of materials, machines and structures. This helps its clients reduce errors and costs.
The uncertain economy is prompting manufacturers to hold off on buying the company’s gear. In its fiscal 2013 third quarter, which ended June 29, 2013, MTS’s revenue fell 4.7%, to $135.1 million from $141.7 million a year earlier.
Sales of testing equipment, which accounted for 82% of MTS’s total sales, declined 5.1%. Revenue at the sensors division (18% of sales) fell 2.7%.
Earnings declined 33.5%, to $11.5 million, or $0.72 a share. A year earlier, MTS earned $17.4 million, or $1.07. The year-earlier results exclude a $7.75-million charge to settle a dispute that kept the company from bidding on U.S. government contracts.
MTS’s long-term outlook remains bright. Demand for its testing equipment should rise as emerging market manufacturers grow more sophisticated. As well, increasingly strict emission and safety regulations are forcing carmakers to develop and test new materials.
The stock has gained 15% in the past year. It now trades at a high but still reasonable 18.8 times MTS’s projected fiscal 2013 earnings of $3.40 a share.
The company has no long-term debt and holds cash of $53.6 million, or $3.43 a share. That gives it plenty of flexibility to buy back shares or raise its $1.20-a-share dividend, which yields 1.9%.
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