Shining a Light on Sun Hydraulics

Royce & Associates has reported a position of 1.8 million shares in Sun Hydraulics (SNHY), an industrial equipment company specializing in cartridge valves. It has a market capitalization of about $710 million and trades almost 60,000 shares daily at $27.50 apiece with well over $1 million in daily dollar volume. The fund, managed by Chuck Royce, tends to invest in small- and mid-cap stocks, even if it means taking a larger stake. Royce's position has increased since the end of September, up from 1.6 million shares at this time last year.

In the third quarter of 2012, Sun Hydraulics experienced an 8% decline in revenue compared to the same period in 2011. There was very little change to costs -- selling, general and administrative expenses actually increased -- the result being a 22% drop in earnings. Both of these figures reversed trends from the first half of the year, when the company reported growth on both top and bottom lines. Looking at the company's geographic segments, the primary culprit for the decline was international operations (including both Europe and Korea), though U.S. operating income was also down by 9%. Combining results from the third quarter and the first two quarters of the year, sales and net income were about flat in the first nine months of 2012 vs. a year earlier. We'd conclude that Sun Hydraulics is, at best stable, and possibly beginning to see a decline in business....360 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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