IDEX Corporation ( IEX Quick Quote IEX - Free Report) reported better-than-expected results for the third quarter of 2020, with earnings exceeding estimates by 16.7%. This was the third consecutive quarter of impressive bottom-line results. Also, the quarter’s sales beat the Zacks Consensus Estimate by 3.1%. The company’s adjusted earnings in the reported quarter were $1.40 per share, surpassing the consensus estimate of $1.20. However, the bottom line declined 7.9% from the year-ago figure of $1.52 due to weak sales generation and a fall in margins. Revenue Details
In the quarter under review, IDEX’s net sales were $581.1 million, reflecting a year-over-year decline of 6.9%. The results suffered from a 12% decline in organic sales, partially offset by a 4% gain from acquired assets and a 1% contribution from foreign currency translation.
However, the company’s revenues surpassed the Zacks Consensus Estimate of $563.5 million. Orders in the quarter totaled $570.3 million, reflecting a year-over-year decline of 3%. Organically, orders fell 5%, while acquired assets and foreign currency translation positively impacted orders by 1% each. It currently reports under three business segments, results of which are discussed below: Revenues from Fluid & Metering Technologies totaled $220.8 million, declining 8.4% year over year. Organic sales were down 17%, while acquisitions and foreign currency translation added 8% and 1%, respectively. Revenues from Health & Science Technologies totaled $220.4 million, reflecting a year-over-year decline of 4%. Organic sales in the quarter decreased 6% year over year, partially offset by a 1% gain from acquired assets and a 1% contribution from foreign currency translation. Revenues from Fire & Safety/Diversified Products totaled $140.9 million, declining 8.8% year over year. The results were adversely impacted by a 10% decline in organic sales, partially offset by a 1% gain from foreign currency translation. Margin Profile
In the quarter under review, IDEX’s cost of sales declined 3.7% year over year to $329.6 million. Adjusted gross profit was $251.5 million, down 11.9% year over year, while adjusted gross margin decreased 240 basis points (bps) to 43.3%. The gross margin suffered from unfavorable impacts of unfavorable business mix and lower volumes, partially offset by pricing.
Selling, general and administrative expenses decreased 8.5% year over year to $117.4 million. It represented 20.2% of revenues. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter under review declined 14.6% year over year to $134.1 million. Also, adjusted EBITDA margin decreased 210 bps year over year to 23.1%. Adjusted operating income was at $156.2 million, down 10.9% year over year, while margin was at 26.9%, down 120 bps. Interest expenses in the quarter declined 6.1% year over year to $10.6 million. Balance Sheet and Cash Flow
Exiting the third quarter, IDEX’s cash and cash equivalents increased 17.6% sequentially to $877.8 million. Further, long-term debt at $1,044.1 million was roughly flat on a sequential basis.
Notably, the company used $300 million for the redemption of 4.5% senior notes, while it raised $499.1 million proceeds from the issuance of 3.0% senior notes in the first nine months of 2020. IDEX generated net cash of $407.9 million from operating activities in the first nine months of 2020, increasing 8.2% from the year-ago comparable period. Capital used for purchasing property, plant and equipment was $39.4 million, reflecting year-over-year growth of 7.2%. Free cash flow was $368.5 million, down 8.3% year over year. The company paid out dividends totaling $114.2 million and repurchased shares worth $110.3 million in the first nine months of 2020, reflecting a year-over-year increase of 4.6% and 101.8%, respectively. Outlook
For the fourth quarter of 2020, IDEX expects a sequential improvement in organic sales, while still predict a decline of 3-5% on a year-over-year basis.