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IDEX (IEX) Beats on Earnings & Revenues in Q2, View Same
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Despite a challenging macroeconomic environment, industrial goods manufacturer IDEX Corporation (IEX - Free Report) reported solid second-quarter 2016 results with a healthy year-over-year increase in earnings. GAAP earnings for the reported quarter were $75.8 million or 99 cents per share compared with $69.6 million or 89 cents per share in the year-ago quarter.
Earnings improved due to a significant improvement in revenues. Reported earnings comfortably beat the Zacks Consensus Estimate by 6 cents.
Revenues
Net sales in the reported quarter were $549.7 million compared with $514.9 million in the year-earlier quarter. Net sales for second-quarter 2016 were well ahead of the Zacks Consensus Estimate of $545 million. The company’s Water, Scientific Fluidics and Dispensing buisnesses continued to outperform, while the North American industrial market was under considerable strain compared with the prior year. During the quarter orders were up 5% at $529 million.
By segments, Fluid and Metering Technologies (FMT) recorded a 3% increase in revenues from the prior-year quarter to $221.8 million due to modest organic and inorganic growth. Health and Science Technologies (HST) revenues were $186.6 million, down 1% year over year. Fire and Safety/Diversified Products (FSD) recorded sales of $141.6 million, up 27% year over year, as it saw 28% inorganic growth, partially offset by a 1% decline in organic growth.
Operating income in second-quarter 2016 was $113 million compared with $110 million in the year-ago quarter. Earnings before interest, taxes depreciation and amortization (EBITDA) came in at $137 million versus $128 million in the year-ago quarter. Gross margin was 44.4%, down 60 basis points from the prior-year quarter owing to an inventory step-up charge related to the Akron Brass acquisition. Operating margin was 20.6%, down 70 basis points year over year.
The FMT segment recorded an operating margin of 24.3% in the reported quarter, up 20 basis points from the year-ago quarter due to higher volume related to the energy business.
The HST segment’s operating margin came in at 22%, down 30 basis points from the prior-year quarter, largely attributable to lower volume in the more industrially exposed portions of the segment.
The FSD segment’s operating margin was 24.1%, down 400 basis points from the year-ago quarter owing to the Akron Brass acquisition inventory step-up charge.
Acquisition
Subsequent to the quarter end, LUKAS Hydraulik GmbH, a subsidiary of IDEX, completed the acquisition of AWG Fittings GmbH (“AWG”) in a €46.0 million cash-free, debt-free transaction. AWG is one of the leading manufacturers of mobile and stationary fire protection systems in the world. This acquisition will boost the company’s Fire Suppression platform with its highly integrated firefighting technology and equipment.
Balance Sheet & Cash Flow
As of Jun 30, 2016, IDEX had cash and cash equivalents of $361.5 million with long-term debt of $1,054.3 million. Cash flow from operating activities was $88.5 million in second-quarter 2016, compared with $99 million in the prior-year period. Free cash flow generated during the quarter totaled $80.1 million versus $86.1 million in the year-ago quarter.
Outlook
IDEX anticipates soft demand patterns in its energy and agriculture businesses to be offset by improving demand in water, scientific fluidics and dispensing businesses. Consequently, the company reiterated flat organic revenue growth for 2016 with operating margins between 20.5–21%. Earnings guidance for 2016 were kept unchanged at $3.70–$3.75, driven by the tax benefit associated with the new accounting guidance for share-based compensation. Third-quarter 2016 earnings are expected to be in the range of 90 cents to 92 cents per share.
IDEX carries a Zacks Rank #2 (Buy). Some other favorably ranked stocks in the industry include Ingersoll-Rand Plc (IR - Free Report) , Luxfer Holdings PLC (LXFR - Free Report) and Manitex International, Inc. (MNTX - Free Report) . All three carry the same Zacks Rank as IDEX.
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IDEX (IEX) Beats on Earnings & Revenues in Q2, View Same
Despite a challenging macroeconomic environment, industrial goods manufacturer IDEX Corporation (IEX - Free Report) reported solid second-quarter 2016 results with a healthy year-over-year increase in earnings. GAAP earnings for the reported quarter were $75.8 million or 99 cents per share compared with $69.6 million or 89 cents per share in the year-ago quarter.
Earnings improved due to a significant improvement in revenues. Reported earnings comfortably beat the Zacks Consensus Estimate by 6 cents.
Revenues
Net sales in the reported quarter were $549.7 million compared with $514.9 million in the year-earlier quarter. Net sales for second-quarter 2016 were well ahead of the Zacks Consensus Estimate of $545 million. The company’s Water, Scientific Fluidics and Dispensing buisnesses continued to outperform, while the North American industrial market was under considerable strain compared with the prior year. During the quarter orders were up 5% at $529 million.
By segments, Fluid and Metering Technologies (FMT) recorded a 3% increase in revenues from the prior-year quarter to $221.8 million due to modest organic and inorganic growth. Health and Science Technologies (HST) revenues were $186.6 million, down 1% year over year. Fire and Safety/Diversified Products (FSD) recorded sales of $141.6 million, up 27% year over year, as it saw 28% inorganic growth, partially offset by a 1% decline in organic growth.
IDEX CORP Price, Consensus and EPS Surprise
IDEX CORP Price, Consensus and EPS Surprise | IDEX CORP Quote
Margins
Operating income in second-quarter 2016 was $113 million compared with $110 million in the year-ago quarter. Earnings before interest, taxes depreciation and amortization (EBITDA) came in at $137 million versus $128 million in the year-ago quarter. Gross margin was 44.4%, down 60 basis points from the prior-year quarter owing to an inventory step-up charge related to the Akron Brass acquisition. Operating margin was 20.6%, down 70 basis points year over year.
The FMT segment recorded an operating margin of 24.3% in the reported quarter, up 20 basis points from the year-ago quarter due to higher volume related to the energy business.
The HST segment’s operating margin came in at 22%, down 30 basis points from the prior-year quarter, largely attributable to lower volume in the more industrially exposed portions of the segment.
The FSD segment’s operating margin was 24.1%, down 400 basis points from the year-ago quarter owing to the Akron Brass acquisition inventory step-up charge.
Acquisition
Subsequent to the quarter end, LUKAS Hydraulik GmbH, a subsidiary of IDEX, completed the acquisition of AWG Fittings GmbH (“AWG”) in a €46.0 million cash-free, debt-free transaction. AWG is one of the leading manufacturers of mobile and stationary fire protection systems in the world. This acquisition will boost the company’s Fire Suppression platform with its highly integrated firefighting technology and equipment.
Balance Sheet & Cash Flow
As of Jun 30, 2016, IDEX had cash and cash equivalents of $361.5 million with long-term debt of $1,054.3 million. Cash flow from operating activities was $88.5 million in second-quarter 2016, compared with $99 million in the prior-year period. Free cash flow generated during the quarter totaled $80.1 million versus $86.1 million in the year-ago quarter.
Outlook
IDEX anticipates soft demand patterns in its energy and agriculture businesses to be offset by improving demand in water, scientific fluidics and dispensing businesses. Consequently, the company reiterated flat organic revenue growth for 2016 with operating margins between 20.5–21%. Earnings guidance for 2016 were kept unchanged at $3.70–$3.75, driven by the tax benefit associated with the new accounting guidance for share-based compensation. Third-quarter 2016 earnings are expected to be in the range of 90 cents to 92 cents per share.
IDEX carries a Zacks Rank #2 (Buy). Some other favorably ranked stocks in the industry include Ingersoll-Rand Plc (IR - Free Report) , Luxfer Holdings PLC (LXFR - Free Report) and Manitex International, Inc. (MNTX - Free Report) . All three carry the same Zacks Rank as IDEX.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>