Machinery company Colfax Corporation reported better-than-expected results for second-quarter 2016. Adjusted earnings came in at 41 cents per share, surpassing the Zacks Consensus Estimate of 39 cents by 5.1%. However, the bottom line declined 18% from the year-ago tally of 50 cents.
Talking about Colfax’s top-line performance, net sales in the quarter were $957.2 million, surpassing the Zacks Consensus Estimate of $942.5 million. However, the top line declined 6.6% year over year due to adverse impacts of 5.6% from fall in existing business revenues and 3.8% from unfavorable foreign currency impacts. These negatives more than offset roughly 2.7% gains from acquired assets.
Exiting the quarter, Colfax’s orders were worth $445.7 million, down 11.3% year over year. Backlog at period-end was $1,068.9 million.
Segmental Details
Colfax reports its net sales under two heads/segments. The segmental results are briefly discussed below:
Revenues from Gas and Fluid Handling totaled $483.7 million, down 4.2% year over year. The decline was triggered by 7% decline in the existing businesses and 2.8% adverse impact from foreign currency translations, partially offset by 5.6% benefit from acquisitions.
Organically, sales declined in oil, gas & petrochemical, 12% in marine, 29.8% in mining and 12.1% in general industrial & other end-markets. These negatives more than offset roughly 2% gain from power generation market.
Revenues from Fabrication Technology fell 9% year over year to $473.5 million due to 1.7% decline in volumes, 2.5% negative impact from price/mix and 4.8% negative impact from foreign currency translations.
Margins
In the quarter, Colfax’s margin profile weakened due mainly to negative impact from lower revenue generation, partially offset by a decline in costs and expenses. Cost of sales decreased 5.9% year over year, representing 68.5% of net sales compared with 68% in the year-ago quarter. Gross margin inched down 50 basis points (bps) year over year to 31.5%. Selling, general and administrative expenses, as a percentage of revenues were 22.3% compared with 21.7% recorded in the year-ago quarter.
Adjusted operating income declined 16.9% year over year, while margin fell 120 bps to 9.1%.
Balance Sheet and Cash Flow
Exiting second-quarter 2016, Colfax’s cash and cash equivalents decreased 5.8% sequentially to $184.7 million. Also, long-term debt balance was down 2.8% sequentially at $1,399.9 million.
In the first half of 2016, Colfax generated net cash of $56.4 million from its operating activities, down from $66.9 million generated in the year-ago period. Capital spending totaled $25.5 million, increasing 39.2% year over year. Share buybacks totaled $20.8 million.
Outlook
For 2016, Colfax revised its earnings guidance by raising the bottom-end of the previous range of $1.40−$1.55 per share. The revised guidance now stands at $1.45−$1.55 per share. Also, the company announced the initiation of additional cost savings strategies that will enable it to mitigate the ill-effects of weak end-markets.
Zacks Rank & Stocks to Consider
With a market capitalization of $3.6 billion, Colfax currently carries a Zacks Rank #3 (Hold). Some competitors of Colfax are performing well and have gained high investment value. Better-ranked machinery stocks include Tennant Company (TNC - Free Report) , Illinois Tool Works Inc. (ITW - Free Report) and Ingersoll-Rand Plc (IR - Free Report) . While Tennant Company sports a Zacks Rank #1 (Strong Buy), both Illinois Tool Works and Ingersoll-Rand carry a Zacks Rank #2 (Buy).
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Machinery company Colfax Corporation reported better-than-expected results for second-quarter 2016. Adjusted earnings came in at 41 cents per share, surpassing the Zacks Consensus Estimate of 39 cents by 5.1%. However, the bottom line declined 18% from the year-ago tally of 50 cents.
Talking about Colfax’s top-line performance, net sales in the quarter were $957.2 million, surpassing the Zacks Consensus Estimate of $942.5 million. However, the top line declined 6.6% year over year due to adverse impacts of 5.6% from fall in existing business revenues and 3.8% from unfavorable foreign currency impacts. These negatives more than offset roughly 2.7% gains from acquired assets.
Exiting the quarter, Colfax’s orders were worth $445.7 million, down 11.3% year over year. Backlog at period-end was $1,068.9 million.
Segmental Details
Colfax reports its net sales under two heads/segments. The segmental results are briefly discussed below:
Revenues from Gas and Fluid Handling totaled $483.7 million, down 4.2% year over year. The decline was triggered by 7% decline in the existing businesses and 2.8% adverse impact from foreign currency translations, partially offset by 5.6% benefit from acquisitions.
Organically, sales declined in oil, gas & petrochemical, 12% in marine, 29.8% in mining and 12.1% in general industrial & other end-markets. These negatives more than offset roughly 2% gain from power generation market.
Revenues from Fabrication Technology fell 9% year over year to $473.5 million due to 1.7% decline in volumes, 2.5% negative impact from price/mix and 4.8% negative impact from foreign currency translations.
Margins
In the quarter, Colfax’s margin profile weakened due mainly to negative impact from lower revenue generation, partially offset by a decline in costs and expenses. Cost of sales decreased 5.9% year over year, representing 68.5% of net sales compared with 68% in the year-ago quarter. Gross margin inched down 50 basis points (bps) year over year to 31.5%. Selling, general and administrative expenses, as a percentage of revenues were 22.3% compared with 21.7% recorded in the year-ago quarter.
Adjusted operating income declined 16.9% year over year, while margin fell 120 bps to 9.1%.
Balance Sheet and Cash Flow
Exiting second-quarter 2016, Colfax’s cash and cash equivalents decreased 5.8% sequentially to $184.7 million. Also, long-term debt balance was down 2.8% sequentially at $1,399.9 million.
In the first half of 2016, Colfax generated net cash of $56.4 million from its operating activities, down from $66.9 million generated in the year-ago period. Capital spending totaled $25.5 million, increasing 39.2% year over year. Share buybacks totaled $20.8 million.
Outlook
For 2016, Colfax revised its earnings guidance by raising the bottom-end of the previous range of $1.40−$1.55 per share. The revised guidance now stands at $1.45−$1.55 per share. Also, the company announced the initiation of additional cost savings strategies that will enable it to mitigate the ill-effects of weak end-markets.
Zacks Rank & Stocks to Consider
With a market capitalization of $3.6 billion, Colfax currently carries a Zacks Rank #3 (Hold). Some competitors of Colfax are performing well and have gained high investment value. Better-ranked machinery stocks include Tennant Company (TNC - Free Report) , Illinois Tool Works Inc. (ITW - Free Report) and Ingersoll-Rand Plc (IR - Free Report) . While Tennant Company sports a Zacks Rank #1 (Strong Buy), both Illinois Tool Works and Ingersoll-Rand carry a Zacks Rank #2 (Buy).
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 >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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