Colfax Corporation ( CFX Quick Quote CFX - Free Report) may interest investors that seek to gain exposure in the manufacturing industry. Its strong fundamentals and healthy growth opportunities are its compelling points. Also, upwardly revised earnings estimates reflect prevailing bullish sentiments. The company currently carries Zacks Rank #2 (Buy). It is based in Fulton, MD, and has a market capitalization of $3.8 billion. The company belongs to the Zacks Manufacturing – General Industrial industry, which is part of the broader Zacks Industrial Products sector. In the past six months, the company’s shares gained 40.6% compared with the industry’s growth of 31.1%. During the same period, the S&P 500 grew 23.9% and the sector expanded 35%.
Below we have discussed why it is prudent to invest in Colfax now.
Segmental Gains: Colfax has two reporting segments, including Fabrication Technology and Medical Technology. Healthy prospects for these segments are likely to support the company’s top-line performance. In the long run, the Medical Technology segment is likely to gain from active lifestyles, population increase, sports, easy accessibility to healthcare and aging. Also, the focus on product development might be beneficial. A few products launched in the past few months include EMPOWR Partial Knee, Motion iQ, Donjoy X-ROM Post-Op Knee Brace, AltiVate Anatomic CS Edge and DonJoy VersaRom Hip Brace. Further, the Fabrication Technology segment stands to benefit from the exposure in emerging markets, infrastructural investments and improving industrial production in the long run. Also, product launches might be beneficial. A few notable products introduced in the past few months are OK GoldRox Stick Electrodes, GCE ProControl, Aristo 500ix & Robust Feed U6, ROGUE ES 180i, and WeldCloud Notes document management software. The Zacks Consensus Estimate for revenues of the Fabrication Technology segment is pegged at $451 million, reflecting growth of 8.9% from $414 million reported in the previous quarter. On the other hand, the consensus estimate for the Medical Technology segment is pinned at $298 million, up 42.6% from $209 million reported in the previous quarter. Diversified Business Structure: The company has exposure in multiple end-markets — including petrochemical, general industrial, power generation, mining, marine, and others. Also, its geographical presence is impressive, having operations in the Middle East, the United States, Europe, Asia, and South America. Such diversifications in business structure help the company to offset weakness in one or more markets with benefits from the others. The Zacks Consensus Estimate for Colfax’s third-quarter revenues is at $756 million, reflecting an increase of 21.6% from $620 million recorded in the previous quarter. Other Tailwinds: In the pandemic period, the company is committed to providing services to customers, ensuring the safety of its workers and keeping healthy liquidity. Also, cost-reduction measures are being taken to tackle the financial pressure. Colfax anticipates that its profits will be higher sequentially in the third quarter of 2020. Earnings before interest, tax and amortization margin are expected to be in low 30% in the quarter. Earnings Estimate Trend: Colfax’s earnings estimates have been revised upward in the past 60 days. Currently, the Zacks Consensus Estimate for its earnings is pegged at $1.36 for 2020, reflecting growth of 4.6% from the 60-day-ago figure. The same for 2021 has increased 2.6% to $1.98 during the same period.