Industrial goods manufacturer IDEX Corporation (IEX - Free Report) started 2017 on a positive note with strong first-quarter 2017 results, driven by healthy year-over-year increase in earnings and revenues. GAAP earnings for the reported quarter were $75.9 million or 99 cents per share compared with $68.1 million or 89 cents per share in the year-ago quarter. The year-over-year improvement was primarily due to top-line growth.
Excluding non-recurring items, adjusted net income for the reported quarter was $79.2 million or $1.03 per share compared with $68.1 million or 89 cents per share in the year-earlier quarter. Adjusted earnings exceeded the Zacks Consensus Estimate by 10 cents.
Revenues
Net sales increased to $553.6 million from $502.6 million in the year-earlier quarter with record level orders. IDEX witnessed significantly higher demand in the North American industrial markets with a marked improvement in larger capital projects. Revenues exceeded the Zacks Consensus Estimate of $533 million.
IDEX reported organic growth of 5% in the reported quarter, the first such growth since the fourth quarter of 2014, owing to a diligent execution of operational plans.
By segments, Fluid and Metering Technologies (FMT) recorded a 2% year-over-year increase in revenues to $216.8 million, primarily led by organic growth of 6%. Health and Science Technologies (HST) revenues were $199.7 million, up 7% year over year owing to accretive acquisitions and organic growth, each improving 5%. Fire and Safety/Diversified Products (FSD) recorded sales of $137.4 million, up 31% year over year, primarily due to inorganic growth.
Margins
Gross margin was 45.3%, up 90 basis points (bps) from the prior-year quarter owing to productivity and volume leverage. Operating income in the quarter was $115.7 million compared with $103.3 million in the year-ago quarter with respective margins of 20.9% and 20.6%. Adjusted operating income for the reported quarter was $120.5 million compared with $103.3 million in the year-earlier quarter for respective margins of 21.8% and 20.6%, primarily due to operational efficiency and fair value inventory step-up charges in the prior year. Earnings before interest, taxes depreciation and amortization or EBITDA were $136.7 million compared with $123.3 million in the year-ago quarter. Adjusted EBITDA improved to $141.5 million from $123.3 million in the prior-year quarter.
The FMT segment recorded an adjusted operating margin of 27.4% in the reported quarter, up 300 bps year over year due to productivity initiatives and higher volume.
The HST segment’s adjusted operating margin came in at 22.7%, up 90 bps from the prior-year quarter. This was largely attributable to the productivity initiatives and higher volume.
The FSD segment’s adjusted operating margin was 23.8%, down 70 bps from the year-ago quarter due to the dilutive impact from acquisitions.
Other Significant Developments
During the reported quarter, IDEX recorded $4.8 million of restructuring costs as part of its concerted efforts to drive sustainable growth through cost-reduction actions by employee reduction and facility rationalization. These include a site consolidation at the Material Processing Technologies platform within the HST segment, along with employee reductions within the FMT and HST segments.
Balance Sheet & Cash Flow
As of Mar 31, 2017, IDEX had cash and cash equivalents of $216.1 million with long-term debt of $950.3 million. Cash flow from operating activities was $85.0 million in the reported quarter compared with $70.4 million in the prior-year quarter. Free cash flow at the quarter end totaled $74.8 million compared with $61.7 million in the year-ago period.
Guidance Raised
With solid quarterly results and robust demand patterns, IDEX raised its earlier guidance for 2017. The company currently expects 3–4% organic growth in 2017 with adjusted earnings of $4.00–$4.17 per share, up from earlier projections of 1–2% organic growth and adjusted earnings of $3.87–$3.95 per share. Second-quarter 2017 adjusted earnings are expected in the range of $1.04–$1.06 per share on organic growth of 2–3%.
IDEX currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Altra Industrial Motion Corp. , DXP Enterprises, Inc. (DXPE - Free Report) and Graco Inc. (GGG - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Altra Industrial has a positive earnings surprise history with an average of 12.49% in the trailing four quarters, comprehensively beating estimates in each.
DXP Enterprises has long-term earnings growth expectations of 20%.
Graco has long-term earnings growth expectations of 10.3%.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>
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 >>
Industrial goods manufacturer IDEX Corporation (IEX - Free Report) started 2017 on a positive note with strong first-quarter 2017 results, driven by healthy year-over-year increase in earnings and revenues. GAAP earnings for the reported quarter were $75.9 million or 99 cents per share compared with $68.1 million or 89 cents per share in the year-ago quarter. The year-over-year improvement was primarily due to top-line growth.
Excluding non-recurring items, adjusted net income for the reported quarter was $79.2 million or $1.03 per share compared with $68.1 million or 89 cents per share in the year-earlier quarter. Adjusted earnings exceeded the Zacks Consensus Estimate by 10 cents.
Revenues
Net sales increased to $553.6 million from $502.6 million in the year-earlier quarter with record level orders. IDEX witnessed significantly higher demand in the North American industrial markets with a marked improvement in larger capital projects. Revenues exceeded the Zacks Consensus Estimate of $533 million.
IDEX reported organic growth of 5% in the reported quarter, the first such growth since the fourth quarter of 2014, owing to a diligent execution of operational plans.
By segments, Fluid and Metering Technologies (FMT) recorded a 2% year-over-year increase in revenues to $216.8 million, primarily led by organic growth of 6%. Health and Science Technologies (HST) revenues were $199.7 million, up 7% year over year owing to accretive acquisitions and organic growth, each improving 5%. Fire and Safety/Diversified Products (FSD) recorded sales of $137.4 million, up 31% year over year, primarily due to inorganic growth.
Margins
Gross margin was 45.3%, up 90 basis points (bps) from the prior-year quarter owing to productivity and volume leverage. Operating income in the quarter was $115.7 million compared with $103.3 million in the year-ago quarter with respective margins of 20.9% and 20.6%. Adjusted operating income for the reported quarter was $120.5 million compared with $103.3 million in the year-earlier quarter for respective margins of 21.8% and 20.6%, primarily due to operational efficiency and fair value inventory step-up charges in the prior year. Earnings before interest, taxes depreciation and amortization or EBITDA were $136.7 million compared with $123.3 million in the year-ago quarter. Adjusted EBITDA improved to $141.5 million from $123.3 million in the prior-year quarter.
The FMT segment recorded an adjusted operating margin of 27.4% in the reported quarter, up 300 bps year over year due to productivity initiatives and higher volume.
The HST segment’s adjusted operating margin came in at 22.7%, up 90 bps from the prior-year quarter. This was largely attributable to the productivity initiatives and higher volume.
The FSD segment’s adjusted operating margin was 23.8%, down 70 bps from the year-ago quarter due to the dilutive impact from acquisitions.
Other Significant Developments
During the reported quarter, IDEX recorded $4.8 million of restructuring costs as part of its concerted efforts to drive sustainable growth through cost-reduction actions by employee reduction and facility rationalization. These include a site consolidation at the Material Processing Technologies platform within the HST segment, along with employee reductions within the FMT and HST segments.
Balance Sheet & Cash Flow
As of Mar 31, 2017, IDEX had cash and cash equivalents of $216.1 million with long-term debt of $950.3 million. Cash flow from operating activities was $85.0 million in the reported quarter compared with $70.4 million in the prior-year quarter. Free cash flow at the quarter end totaled $74.8 million compared with $61.7 million in the year-ago period.
Guidance Raised
With solid quarterly results and robust demand patterns, IDEX raised its earlier guidance for 2017. The company currently expects 3–4% organic growth in 2017 with adjusted earnings of $4.00–$4.17 per share, up from earlier projections of 1–2% organic growth and adjusted earnings of $3.87–$3.95 per share. Second-quarter 2017 adjusted earnings are expected in the range of $1.04–$1.06 per share on organic growth of 2–3%.
IDEX currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Altra Industrial Motion Corp. , DXP Enterprises, Inc. (DXPE - Free Report) and Graco Inc. (GGG - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Altra Industrial has a positive earnings surprise history with an average of 12.49% in the trailing four quarters, comprehensively beating estimates in each.
DXP Enterprises has long-term earnings growth expectations of 20%.
Graco has long-term earnings growth expectations of 10.3%.
Zacks' 2017 IPO Watch List
Before looking into the stocks mentioned above, you may want to get a head start on potential tech IPOs that are popping up on Zacks' radar. Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the current scoop on 5 that may go public at any time.
One has driven from 0 to a $68 billion valuation in 8 years. Four others are a little less obvious but already show jaw-dropping growth. Download this IPO Watch List today for free >>
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 >>
Get the latest research report on GGG - FREE
Get the latest research report on IEX - FREE
Get the latest research report on DXPE - FREE