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Why Is Mettler-Toledo (MTD) Up 8% Since Last Earnings Report?

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It has been about a month since the last earnings report for Mettler-Toledo (MTD - Free Report) . Shares have added about 8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mettler-Toledo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Mettler-Toledo Q2 Earnings & Revenues Beat Estimates

Mettler-Toledo International, Inc. reported second-quarter 2020 adjusted earnings of $5.29 per share, which beat the Zacks Consensus Estimate of $4.27. The bottom line increased 3% on a year-over-year basis and 32.3% sequentially.

Net sales of $690.7 million were down 6% on a reported basis and 4% on a currency neutral basis from the year-ago quarter. However, the top line expanded 6.4% from the prior quarter.

Notably, the top line surpassed the Zacks Consensus Estimate by 6.7%.

Impressive growth in China, and the diversity in the company’s Laboratory and Industrial businesses contributed to better-than-expected performance.

However, demand in its end markets was negatively impacted by the COVID-19 pandemic.

Nevertheless, it remains confident of margin and productivity initiatives. Further, Mettler-Toledo’s temporary cost-containment measures and declining discretionary spending are expected to aid near-term performance.

Top Line in Detail

By Segments: The company reports in three segments — Laboratory Instruments, Industrial Instruments and Food Retail, which accounted for 52%, 42% and 6% of second-quarter net sales, respectively. The segments were down 4%, 3% and 11% from the year-ago quarter, respectively.

By Geography: It reports sales from Americas, Europe and Asia/Rest of the World (ROW). These regions contributed 39%, 28% and 33% to second-quarter net sales, respectively. While sales in Americas and Europe were down 7% and 5% from the year-ago quarter, respectively, the same in Asia/ROW was up 1%.

Operating Results

Gross margin was 57.6%, expanding 20 basis points (bps) year over year.

Research & development (R&D) expenses were $31.2 million, down 17.3% from the year-ago quarter. Selling, general & administrative (SG&A) expenses decreased 7.9% year over year to $190.1 million.

As a percentage of sales, R&D as well as SG&A expenses contracted 50 and 60 bps, respectively, from the year-ago quarter.

Adjusted operating margin was 25.6%, which expanded 130 bps on a year-over year basis.

Balance Sheet and Cash Flow

As of Jun 30, 2020, the company’s cash and cash equivalent balance was $127.3 million, down from $323.6 million on Mar 31, 2020.

Long-term debt was $1.1 billion, decreasing from $1.5 billion in the first quarter.

Mettler-Toledo generated $183.2 million of cash from operating activities, up from $65.5 million in the first quarter. Free cash flow was $170 million during the reported quarter.

Guidance

For third-quarter 2020, Mettler-Toledo anticipates sales to decline between 1% and 3% on a year-over-year basis in local currency.

Adjusted earnings are anticipated in the range of $5.80-$6 per share.

For the full year of 2020, it anticipates sales to decline between 1% and 3% on a year-over-year basis in local currency. Adjusted earnings are anticipated in the range of $22.70-$23.20 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 21.79% due to these changes.

VGM Scores

At this time, Mettler-Toledo has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Mettler-Toledo has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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