It has been about a month since the last earnings report for Idex (
IEX Quick Quote IEX - Free Report) . Shares have added about 1.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Idex due for a pullback? 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 Q2 Earnings Beat Estimates, Lowers 2023 EPS View
IDEX’s second-quarter 2023 adjusted earnings of $2.18 per share, surpassed the Zacks Consensus Estimate of adjusted earnings of $2.12 per share. On a year-over-year basis, the bottom line increased 7.9% from the year-ago quarter’s figure of $2.02 per share. Healthy segmental results favorably impacted the quarter’s earnings.
Earnings for the second quarter exceeded management’s projection of $2.10-$2.13 per share. Revenue Details
In the quarter under review, IDEX’s net sales of $846.2 million underperformed the Zacks Consensus Estimate of $847 million. However, the top line increased 6.3% year over year. Organic sales in the quarter increased 3% year over year, in line with approximately 3% growth expected by IEX. Acquired assets boosted sales 4%. Foreign currency translation left a negative impact of 1%.
IEX reports net sales under three business segments, the results of which are discussed below: Revenues from the Fluid & Metering Technologies segment totaled $325.1 million, increasing 8.4% year over year. Organic sales were up 10%. However, acquisitions/divestitures and foreign currency translation left a negative impact of 1% each. Revenues from the Health & Science Technologies segment totaled $339.5 million, reflecting year-over-year growth of 4.1%. Organic sales in the quarter declined 6% year over year, while acquired assets boosted sales 10%. Revenues from the Fire & Safety/Diversified Products segment totaled $184.8 million, rising 7.9% year over year. The results were aided by an 8% increase in organic sales. Margin Profile
In the quarter under review, IDEX’s cost of sales increased 6.6% year over year to $468.2 million. The gross profit was $378.0 million, up 5.9% year over year, while the gross margin was 44.7%, compared with 44.8% reported in the year-ago quarter.
Selling, general and administrative expenses increased 4.1% year over year to $174.3 million. The same represented 20.6% of revenues. Adjusted EBITDA in the quarter under review increased 9.8% year over year to $240.7 million. The adjusted EBITDA margin increased 90 bps year over year to 28.4%. The operating income was $200.1 million, up 7.2% year over year, whereas the margin was 23.6%, up 20 bps year over year. Interest expenses in the quarter increased 40% year over year to $13.3 million. Balance Sheet and Cash Flow
While exiting the second quarter, IDEX’s cash and cash equivalents was $457.0 million, compared with $430.2 million recorded at the end of fourth-quarter 2022. Long-term borrowings were $1,471.5 million, compared with $1,468.7 million recorded at the end of fourth-quarter 2022.
In the first six months of 2023, IDEX generated net cash of $289.1 million from operating activities, increasing 50.6% from the year-ago period. Capital used for purchasing property, plant and equipment was $48.2 million, compared with $31.7 million in December 2022. Free cash flow was $240.9 million, up 50.3% year over year. IEX paid out dividends totaling $93.9 million, up 8.1% year over year. The company repurchased common stock worth $1 million in the quarter. IEX spent $110.3 million on acquisitions in the first six months of 2023. Outlook
For third-quarter 2023, IEX predicts earnings of $1.60-$1.65 per share and 7-8% decline in organic sales from the respective year-ago readings.
IDEX anticipates adjusted earnings of $1.84-$1.89 per share for third-quarter 2023. The Zacks Consensus Estimate for the same stands at $2.18 per share. The company has lowered its guidance for 2023. IDEX now anticipates adjusted earnings of $7.90-$8.00 per share, compared with $8.25-$8.55 per share anticipated earlier. The Zacks Consensus Estimate for the same stands at $8.51 per share. Full-year earnings are predicted to be $6.80-$6.90 per share, compared with $7.30-$7.60 per share expected earlier. Organic sales are predicted to decline 1-2% for 2023. How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -13.63% due to these changes.
At this time, Idex has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Idex has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.