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We have issued an updated research report on Colfax Corporation on Sep 5, 2016. This machinery company manufactures specialized products and services related to gas and fluid handling, and fabrication technology.
Colfax Corporation, with $3.7 billion in market capitalization, has strong fundamentals supporting growth. However exposure to near-term headwinds is restricting its growth momentum.
Below-mentioned pros and cons will justify our investment ranking on Colfax Corporation.
Growth Drivers
A diversified product portfolio as well as businesses in diverse nations and end-markets has enabled Colfax Corporation to strengthen its organic growth over time. The company’s Gas and Fluid Handling segment caters to the needs of the customers in the power generation, oil, gas and petrochemical, mining, marine and general industrial and other end-markets. Its Fabrication Technology segment deals with products primarily used in cutting and joining of steel, aluminum and other metals and metal alloys. Also, the company’s client base is strong, ranging from commercial to governmental customers spread across the U.S., Europe, Asia, the Middle East and South America.
In addition, Colfax Corporation aims at business expansion through organic and inorganic means. It also seeks to improve profitability through strict expense control measures. The company is on track to generate roughly $50 million incremental cost savings (original cost saving expectation was $100 million) from its cost-reduction programs by the end of 2016. Moreover, it announced the initiation of additional cost savings strategies that will enable it to mitigate the ill-effects of weak end-markets.
Over the long run, Colfax Corporation expects organic growth to be 1−2% higher than the Gross Domestic Product and operating margins to come in the mid teens. Also, the company intends to boost free cash flow to fund acquisitions.
Near-Term Headwinds
Colfax is exposed to risks arising from stiff competition, uncertain global economic conditions, unfavorable movements in foreign currencies, weak order flow, and geopolitical issues. Also, delays or difficulties in procuring raw materials including metals, castings, motors, seals and bearings, from suppliers both in the U.S. and international markets might prove unfavorable for the company’s business.
Conclusion
Colfax Corporation currently carries a Zacks Rank #3 (Hold). We believe the pros and cons clearly justify the company’s investment value. Some better-ranked stocks in the machinery industry include DXP Enterprises, Inc. (DXPE - Free Report) , Gorman-Rupp Co. (GRC - Free Report) and Nordson Corporation (NDSN - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).
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Colfax's Growth Potential Solid, Near-Term Risks Remain
We have issued an updated research report on Colfax Corporation on Sep 5, 2016. This machinery company manufactures specialized products and services related to gas and fluid handling, and fabrication technology.
Colfax Corporation, with $3.7 billion in market capitalization, has strong fundamentals supporting growth. However exposure to near-term headwinds is restricting its growth momentum.
Below-mentioned pros and cons will justify our investment ranking on Colfax Corporation.
Growth Drivers
A diversified product portfolio as well as businesses in diverse nations and end-markets has enabled Colfax Corporation to strengthen its organic growth over time. The company’s Gas and Fluid Handling segment caters to the needs of the customers in the power generation, oil, gas and petrochemical, mining, marine and general industrial and other end-markets. Its Fabrication Technology segment deals with products primarily used in cutting and joining of steel, aluminum and other metals and metal alloys. Also, the company’s client base is strong, ranging from commercial to governmental customers spread across the U.S., Europe, Asia, the Middle East and South America.
In addition, Colfax Corporation aims at business expansion through organic and inorganic means. It also seeks to improve profitability through strict expense control measures. The company is on track to generate roughly $50 million incremental cost savings (original cost saving expectation was $100 million) from its cost-reduction programs by the end of 2016. Moreover, it announced the initiation of additional cost savings strategies that will enable it to mitigate the ill-effects of weak end-markets.
Over the long run, Colfax Corporation expects organic growth to be 1−2% higher than the Gross Domestic Product and operating margins to come in the mid teens. Also, the company intends to boost free cash flow to fund acquisitions.
Near-Term Headwinds
Colfax is exposed to risks arising from stiff competition, uncertain global economic conditions, unfavorable movements in foreign currencies, weak order flow, and geopolitical issues. Also, delays or difficulties in procuring raw materials including metals, castings, motors, seals and bearings, from suppliers both in the U.S. and international markets might prove unfavorable for the company’s business.
Conclusion
Colfax Corporation currently carries a Zacks Rank #3 (Hold). We believe the pros and cons clearly justify the company’s investment value. Some better-ranked stocks in the machinery industry include DXP Enterprises, Inc. (DXPE - Free Report) , Gorman-Rupp Co. (GRC - Free Report) and Nordson Corporation (NDSN - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>