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Why Is Mettler-Toledo (MTD) Up 2.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Mettler-Toledo (MTD - Free Report) . Shares have added about 2.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mettler-Toledo due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Mettler-Toledo Q3 Earnings & Revenues Beat Estimates

Mettler-Toledo International reported third-quarter 2020 adjusted earnings of $7.02 per share, which beat the Zacks Consensus Estimate by 16.6%. The bottom line also improved 22% on a year-over-year basis and 32.7%, sequentially.

Net sales of $807.4 million were up 7% on reported basis and 6% on currency neutral basis from the respective year-ago quarter’s levels. Further, the top line rose 16.9% from the prior quarter. Also, the same surpassed the Zacks Consensus Estimate of $747.9 million.

Solid momentum across Laboratory and Food Retail segments during the reported quarter drove the the topline. Further, a strong performance delivered by the company across all geographies, especially in China, remained a major positive.

However, headwinds related to the coronanvirus persistently posed challenges to the company during the reported quarter. Moreover, uncertainties due to the ongoing pandemic are likely to linger in the near term, which is a concern.

Nevertheless, the company’s portfolio strength, cost-cutting efforts, robust sales, marketing strategies, and margin and productivity initiatives are expected to aid its near-term performance.

Top Line in Detail

By Segments: The company reports under three segments, namely Laboratory Instruments, Industrial Instruments and Food Retail, which accounted for 53%, 40% and 7% of the net sales in the thirdquarter, respectively. Further, Laboratory, Industrial and Food Retail segments witnessed year-over-year growth of 9%, 1% and 5% each in the quarter under review.

By Geography: The company reports total sales from the Americas, Europe and Asia/Rest of the World. All these regions contributed 38%, 29% and 33% to the net sales in the third quarter, respectively. Further, sales in these regions went up 3%, 4% and 10% each on a year-over-year basis.

Operating Results

Gross margin was 58.2%, expanding 50 bps year over year.

Research & development (R&D) expenses were $34.7 million, down3.8% from the year-ago quarter. Selling, general & administrative (SG&A) expenses increased 1.1% year over year to $204.9 million.

As a percentage of sales, R&D expenses contracted 50 bps year over year to 4.3%. Further, SG&A expenses contracted 150 bps year over year to 25.4%.

Adjusted operating margin was 28.5%, which expanded 250 bps from the prior-year quarter.

Balance Sheet & Cash Flow

As of Sep 30, 2020, the company’s cash and cash equivalent balance was $153.7 million, up from $127.3 million on Jun 30, 2020.

Long-term debt was $1.2 billion at the end of the third quarter, increasing from $1.1 billion at the end of second quarter.

Mettler-Toledo generated $225.1 million of cash from operating activities in the reported quarter, up from $183.2 million in the previousquarter. Free cash flow was $211.7 million during the reported quarter.

Guidance

For fourth-quarter 2020, Mettler-Toledo anticipates sales to decline between 4% and 5% on a year-over-year basis in local currency.

Adjusted December-quarter earnings are anticipated in the range of $8.60-$8.70 per share, implying an 11-12% rise from the year-ago quarter’s reported figure.

For the full year, the company anticipates sales to grow 1%, suggesting an upside in local currency from the year-earlier reported number.

Adjusted 2020 earnings are anticipated in the range of $24.87-$24.97 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 9.28% due to these changes.

VGM Scores

At this time, Mettler-Toledo has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Mettler-Toledo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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