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Growth & Income

IDEX Corporation (IEX - Analyst Report) recently delivered a strong earnings and sales beat for the first quarter, and management raised its guidance for the remainder of 2012.

This prompted analysts to revise their estimates higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy).

In addition, IDEX recently increased its dividend by 18%. It currently yields 1.8%.

Company Description

IDEX Corp manufactures a broad range of fluid handling and industrial products. Sales for the first quarter of 2012 were divided as follows:

Fluid & Metering Technologies: 44%
Health & Science Technologies: 35%
Fire & Safety/Diversified Products: 21%

The company was founded in 1987 and is headquartered in Lake Forest, Illinois. It has a market cap of $3.6 billion.

First Quarter Results

IDEX delivered stellar results for the first quarter of 2012. Earnings per share came in at 66 cents, beating the Zacks Consensus Estimate by 2 cents. It was a 16% increase over the same quarter last year.

Sales rose 15% year-over-year to a record $489.4 million, well ahead of the Zacks Consensus Estimate of $481.0 million. This was driven in large part by acquisitions, but organic growth was a solid 6%.

Organic growth was up in each segment, including 8% in Fluid & Metering and 7% in Fire & Safety/Diversified Products.

Operating income increased 15% year-over-year as the operating margin improved slightly from 18.2% to 18.3% of sales.

Outlook

Following strong first quarter results, management increased its guidance for the remainder of the year. The company now expects EPS of $2.80-$2.85 on mid-single digit organic revenue growth.

This prompted analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy).

The Zacks Consensus Estimate for 2012 is now $2.82, within guidance, and representing 10% growth over 2011 EPS. The 2013 consensus estimate is currently $3.16, corresponding with 12% growth.

Dividend

IDEX also recently announced an 18% increase in its quarterly dividend. Since 2000, the company has increased its dividend at a compound annual rate of 10%:

IEX: IDEX Corporation

It currently yields a solid 1.8%.

Valuation

The valuation picture looks very reasonable for IEX. Shares trade at 14.8x 12-month forward earnings, a discount to its 10-year median of 17.2x.

Its PEG ratio is 1.0 based on a consensus long-term EPS growth rate of 15.0%.

The Bottom Line

With rising estimates, strong growth projections, a solid 1.8% yield, and reasonable valuation, IDEX offers investors attractive upside potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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