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Why Is Idex (IEX) Up 2.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Idex (IEX - Free Report) . Shares have added about 2.1% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

IDEX Q3 Earnings Beat Estimates, Revenues Down Y/Y

IDEX’s third-quarter 2023 adjusted earnings of $2.12 per share surpassed the Zacks Consensus Estimate of adjusted earnings of $1.89 per share. On a year-over-year basis, the bottom line decreased approximately 1% from the year-ago quarter’s figure of earnings of $2.02 per share due to the lower effective tax rate.

Earnings for the third quarter exceeded management’s projection of $1.60-$1.65 per share.

Revenue Details

In the quarter under review, IDEX’s net sales of $793.4 million outperformed the Zacks Consensus Estimate of $790 million. However, the top line decreased 3.7% year over year. Organic sales in the quarter decreased 6% year over year, lower than the 8-7% decline expected by IEX. The exit of a COVID testing application in 2022, which did not reoccur in 2023, impacted sales by 2%. Acquisitions/divestitures boosted sales 3%. Foreign currency translation left a positive 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 $301.1 million, decreasing 2.1% year over year. Our estimate for segmental revenues was $295 million. Organic sales were down 1%. However, acquisitions/divestitures left a negative impact of 2% while foreign currency translation left a positive impact of 1%.

Revenues from the Health & Science Technologies segment totaled $313.2 million, reflecting a year-over-year decline of 9.2%. Our estimate for segmental revenues was $330 million. Organic sales in the quarter declined 15% year over year, while acquired assets boosted sales 10%. The exit of a COVID testing application in 2022, which did not reoccur in 2023, impacted sales by 5%. Foreign currency translation left a positive impact of 1%.

Revenues from the Fire & Safety/Diversified Products segment totaled $180.6 million, rising 4.8% year over year. Our estimate for segmental revenues was $166.9 million. The results were aided by a 3% increase in organic sales. Foreign currency translation left a positive impact of 2%.

Margin Profile

In the quarter under review, IDEX’s cost of sales increased 0.4% year over year to $443.8 million. The gross profit was $349.6 million, down 8.4% year over year, while the gross margin was 44.1% compared with 46.3% reported in the year-ago quarter.

Selling, general and administrative expenses increased 2.5% year over year to $165.9 million. Adjusted EBITDA in the quarter under review decreased 2.6% year over year to $225.5 million. The adjusted EBITDA margin decreased 30 bps year over year to 28.4%.

The operating income was $179.6 million, down 11.2% year over year, whereas the margin was 22.6%, down 190 bps year over year. Interest expenses in the quarter increased 42.7% year over year to $13.7 million.

Balance Sheet and Cash Flow

While exiting the third quarter, IDEX’s cash and cash equivalents were $562.7 million compared with $430.2 million recorded at the end of fourth-quarter 2022. Long-term borrowings were $1,320.8 million compared with $1,468.7 million recorded at the end of fourth-quarter 2022.

In the first nine months of 2023, IDEX generated net cash of $515.7 million from operating activities, increasing 32.2% from the year-ago period. Capital used for purchasing property, plant and equipment was $68.3 million compared with $48.0 million in December 2022. Free cash flow was $447.4 million, up 30.8% year over year.

IEX paid out dividends totaling $142.3 million, up 7.6% year over year. The company repurchased common stock worth $1.1 million in the quarter.

IEX spent $110.3 million on acquisitions in the first nine months of 2023.

Outlook

For fourth-quarter 2023, IEX predicts earnings to be $1.50-$1.55 per share and an 8-9% decline in organic sales from the respective year-ago readings.

IDEX anticipates adjusted earnings to be $1.74-$1.79 per share for fourth-quarter 2023. The Zacks Consensus Estimate for the same stands at $1.80 per share.

The company has raised its guidance for 2023. IDEX now anticipates adjusted earnings to be $8.13-$8.18 per share compared with adjusted earnings of $7.90-$8.00 per share anticipated earlier. The consensus estimate for the same stands at $7.97 per share.

Full-year earnings are predicted to be $7.91-$7.96 per share compared with $6.80-$6.90 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.

VGM Scores

Currently, Idex has an average Growth Score of C, a grade with the same score on the momentum front. 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

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Idex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Idex belongs to the Zacks Manufacturing - General Industrial industry. Another stock from the same industry, Crane (CR - Free Report) , has gained 15% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Crane reported revenues of $530.1 million in the last reported quarter, representing a year-over-year change of


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