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Why Is Idex (IEX) Down 3.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Idex (IEX - Free Report) . Shares have lost about 3.6% in that time frame, outperforming the S&P 500.

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

IDEX Beats on Q1 Earnings, Projects 2022 Growth Y/Y

IDEX Corporation reported impressive first-quarter 2022 results. IEX’s earnings surpassed the Zacks Consensus Estimate by 12.6%, whereas sales surpassed the same by 4.1%.

In the reported quarter, IDEX’s adjusted earnings were $1.96 per share, beating the Zacks Consensus Estimate of $1.74. On a year-over-year basis, the bottom line increased 21% from the year-ago quarter’s figure of $1.62. Healthy segmental results favorably impacted the quarter’s earnings.

Earnings for the first quarter surpassed management’s projection of $1.73-$1.76.

Revenue Details

In the quarter under review, IDEX’s net sales were $751.1 million, reflecting year-over-year growth of 15.2%. Organic sales in the quarter increased 12% year over year, higher than 5-8% growth expected by IEX. Acquired assets boosted sales 5%. Foreign-currency translation left a negative impact of 2%.

IDEX’s top line surpassed the Zacks Consensus Estimate of $721 million.

IEX reports net sales under three business segments, results of which are discussed below:

Revenues from Fluid & Metering Technologies totaled $272.0 million, increasing 12% year over year. Organic sales were up 11% and synergies from acquired assets added 2%. Foreign-currency translation left a negative impact of 1%.

Revenues from Health & Science Technologies totaled $315.2 million, reflecting year-over-year growth of 26%. Organic sales in the quarter increased 16% year over year, while acquisitions/divestitures boosted sales 11%. Foreign currency translation left a negative impact of 1%.

Revenues from Fire & Safety/Diversified Products totaled $164.7 million, rising 3% year over year. The results were aided by a 5% increase in organic sales but suffered 2% forex woes.

Margin Profile

In the quarter under review, IDEX’s cost of sales increased 13.7% year over year to $408.6 million. The adjusted gross profit was $342.5 million, up 16.8% year over year, while the adjusted gross margin increased 60 basis points (bps) to 45.6%.

Selling, general and administrative expenses increased 14.4% year over year to $154.3 million. The same represented 20.5% of revenues. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter under review increased 18.8% year over year to $214.7 million. Also, the adjusted EBITDA margin increased 90 bps year over year to 28.6%.

The adjusted operating income was $187.6 million, up 18.4% year over year, whereas the margin was 25.0%, up 70 bps. Interest expenses in the quarter dropped 11.2% year over year to $9.5 million.

Balance Sheet and Cash Flow

Exiting the first quarter, IDEX’s cash and cash equivalents decreased 14.3% sequentially to $733.2 million. Long-term debt was $1,190.6 million, almost similar to the figure at the previous-quarter end.

In the first three months of 2022, IDEX generated net cash of $79.7 million from operating activities, decreasing 27.1% from the year-ago quarter’s level. Capital used for purchasing property, plant and equipment was $16.1 million compared with $14.6 million in first-quarter 2021. Free cash flow was $63.6 million, down 32.8% year over year.

IEX paid out dividends totaling $41.4 million and repurchased common stocks worth $26.3 million.

Amount spent on acquisitions, net of acquired cash, totaled $114.7 million. On Mar 13, 2022, IDEX inked a deal to buy KZValve, valued at $120 million of cash. The transaction is expected to be complete in second-quarter 2022.

Outlook

For second-quarter 2022, IDEX anticipates adjusted earnings of $1.85-$1.90 per share and 8-9% growth in organic sales from the year-ago period’s reading.

For 2022, IDEX anticipates adjusted earnings of $7.50-$7.63 per share. Organic sales are predicted to grow 6-8%.

The accretive acquisition impact on revenues will likely be 6% for the second quarter and 4% for the current year. The tax rate for the second quarter as well as for the whole year is expected to be 22.5%.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

At this time, Idex has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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

Idex has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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