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Colfax's (CFX) Q3 Earnings Beat, Revenues Miss Estimates

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Colfax Corporation  reported mixed results for third-quarter 2018.

Earnings/Revenues

Quarterly earnings came in at 54 cents per share, up from the year-ago tally of 46 cents per share. The bottom line also surpassed the Zacks Consensus Estimate of 52 cents.

Revenues in the third quarter came in at $875.4 million, up 3.7% year over year. However, the top-line figure missed the Zacks Consensus Estimate of $893 million.

Segmental Break-Up

Revenues in the Air and Gas Handling segment in the reported quarter were $351.4 million, down 3% year over year. The Fabrication Technology segment’s top-line performance improved 8.7% to $524 million.

Colfax Corporation Price, Consensus and EPS Surprise

 

Colfax Corporation Price, Consensus and EPS Surprise | Colfax Corporation Quote

Costs/Margins

Cost of sales in the reported quarter came in at $604.4 million, up 4.1% year over year. Gross profit margin in the quarter was 31%, down 20 basis points (bps) from the year-ago tally.

Selling, general and administrative expenses flared up 7.1% year over year to $194.8 million in the quarter. Adjusted operating margin in the Sep-end quarter was 8.7%, down 100 bps year over year.

Balance Sheet/Cash Flow

Exiting the third quarter, Colfax had cash and cash equivalents worth $285.9 million, up from $262 million recorded as of Dec 31, 2017. Long-term debt stood at $1,135.6 million, up from $1,055.3 million recorded at the end of 2017.

In the first nine months of 2018, the company generated $100.8 million cash from operating activities, down 12.1% year over year. Capital expenditures came in at $40.2 million, up 9.5% year over year.

During the Jul-Sep quarter, Colfax successfully acquired ACH Equipos Ltda. (ACH) and Advanced Combustion Inc. (ACI). These businesses are grouped under the company’s Air & Gas Handling segment. Moreover, this October, Colfax closed the buyout deal of Gas Control Equipment (GCE). The business is included in the company’s Fabrication Technology segment.

Outlook

In the second half of 2018, Colfax anticipates strong performance, backed by a strengthening Fabrication Technology business, margin growth in Air & Gas Handling business, and gains from restructuring initiatives. Furthermore, strategic acquisitions will support growth in unexplored markets and new business platforms, going forward. Notably, this Zacks Rank #3 (Hold) company believes the ACH and ACI acquisitions will be conducive to its 2018 revenues by more than $30 million.

Based on the existing market conditions, Colfax revised its earnings view for 2018 from $2.15-$2.30 to the $2.20-$2.30 per share range.

Stocks to Consider

Some better-ranked stocks in the Zacks Industrial Products sector are listed below:

Altra Industrial Motion Corp. sports a Zacks Rank #1 (Strong Buy). The company pulled off an average positive earnings surprise of 4.01% in the past four quarters. . You can see the complete list of today’s Zacks #1 Rank stocks here.

Donaldson Company, Inc. (DCI - Free Report) also sports a Zacks Rank of 1. The company delivered an average positive earnings surprise of 2.29% in the preceding four quarters.

Atkore International Group Inc. (ATKR - Free Report) carries a Zacks Rank #2 (Buy). The company generated an average positive earnings surprise of 24.46% in the trailing four quarters.

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