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Colfax Corporation stands to gain from its presence in diverse end markets, which allows it to neutralize risks associated with a single market on strength across others. The company's focus on product innovation, a healthy business system, a solid product portfolio and strengthening demand for its products are likely to drive its performance in the quarters ahead. In the long run, growth in infrastructural investments and exposure in emerging markets will likely be beneficial.
The company believes in strengthening its businesses through the addition of assets. It acquired Mathys AG Bettlach (July 2021), which has been supporting its growth opportunities in the MedTech Reconstructive business. Its acquisition of MedShape (April 2021) has enhanced growth opportunities in the reconstructive business. Also, the buyout of Trilliant Surgical (January 2021) strengthened its DJO Global business and enhanced its foot and ankle solution offerings. In third-quarter 2021, acquisitions had a positive contribution of 5.7% to its sales.
However, escalating costs and expenses have been weighing on CFX over the past few quarters. In the third quarter, its costs of sales jumped 21.5% on a year-over-year basis, while selling, general and administrative expenses rose 20.3%. In the quarter, its gross margin declined 80 basis points year over year. The company has been witnessing supply-chain challenges, logistics issues and cost inflation, which might affect its margins and profitability in the coming quarters.
Colfax’s high-debt profile poses a concern. Its long-term debt was $1,611.7 million at the end of the third quarter, reflecting a 2.2% increase on a sequential basis. Interest expenses (net) in the quarter were $13.5 million. Any further increase in debt levels can raise the company’s financial obligations and hurt profitability.
Image Source: Zacks Investment Research
In the past three months, this Zacks Rank #3 (Hold) stock has lost 17.4% compared with the industry’s decline of 12.1%.
Key Picks
Some better-ranked companies from the same space are discussed below.
In the past 30 days, Applied Industrial’s earnings estimates have increased 9.4% for fiscal 2022 (ending June 2022). Its shares have lost 6.7% in the past three months.
Graco Inc. (GGG - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 2.46%, on average.
In the past 30 days, Graco’s earnings estimates have increased 1.1% for 2022. Its shares have lost 7% in the past three months.
IDEX Corporation (IEX - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 1.46%, on average.
IDEX’s earnings estimates have increased 4.1% for 2022 in the past 30 days. Its shares have lost 19.9% in the past three months.
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Colfax (CFX) Exhibits Strong Prospects, Headwinds Persist
Colfax Corporation stands to gain from its presence in diverse end markets, which allows it to neutralize risks associated with a single market on strength across others. The company's focus on product innovation, a healthy business system, a solid product portfolio and strengthening demand for its products are likely to drive its performance in the quarters ahead. In the long run, growth in infrastructural investments and exposure in emerging markets will likely be beneficial.
The company believes in strengthening its businesses through the addition of assets. It acquired Mathys AG Bettlach (July 2021), which has been supporting its growth opportunities in the MedTech Reconstructive business. Its acquisition of MedShape (April 2021) has enhanced growth opportunities in the reconstructive business. Also, the buyout of Trilliant Surgical (January 2021) strengthened its DJO Global business and enhanced its foot and ankle solution offerings. In third-quarter 2021, acquisitions had a positive contribution of 5.7% to its sales.
However, escalating costs and expenses have been weighing on CFX over the past few quarters. In the third quarter, its costs of sales jumped 21.5% on a year-over-year basis, while selling, general and administrative expenses rose 20.3%. In the quarter, its gross margin declined 80 basis points year over year. The company has been witnessing supply-chain challenges, logistics issues and cost inflation, which might affect its margins and profitability in the coming quarters.
Colfax’s high-debt profile poses a concern. Its long-term debt was $1,611.7 million at the end of the third quarter, reflecting a 2.2% increase on a sequential basis. Interest expenses (net) in the quarter were $13.5 million. Any further increase in debt levels can raise the company’s financial obligations and hurt profitability.
Image Source: Zacks Investment Research
In the past three months, this Zacks Rank #3 (Hold) stock has lost 17.4% compared with the industry’s decline of 12.1%.
Key Picks
Some better-ranked companies from the same space are discussed below.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Its earnings surprise in the last four quarters was 27.96%, on average.
In the past 30 days, Applied Industrial’s earnings estimates have increased 9.4% for fiscal 2022 (ending June 2022). Its shares have lost 6.7% in the past three months.
Graco Inc. (GGG - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 2.46%, on average.
In the past 30 days, Graco’s earnings estimates have increased 1.1% for 2022. Its shares have lost 7% in the past three months.
IDEX Corporation (IEX - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 1.46%, on average.
IDEX’s earnings estimates have increased 4.1% for 2022 in the past 30 days. Its shares have lost 19.9% in the past three months.