On Aug 21, we updated the research report on industrial goods manufacturer, IDEX Corporation (IEX - Free Report) .
IDEX is currently striving to improve productivity and expand its businesses in the emerging markets by focusing on organic growth. At the same time, the company aims to exploit suitable acquisition opportunities to fuel its inorganic growth momentum. These acquisitions expand its geographic reach, fill technology gaps and strengthen its foothold in the existing markets while expanding its product lines.
The company also aims to increase its market exposure and improve sales mix by continually developing new products. With a flexible yet disciplined focus on cost and productivity, it intends to optimize the cost structure, increase competitiveness and reallocate resources to improve profitability in the future. IDEX has outperformed the industry with an average year-to-date return of 25.4% compared with a gain of 11% for the latter.
The company reported strong second-quarter 2017 results with healthy year-over-year increase in earnings and revenues. In addition, IDEX generated solid order levels and witnessed significantly higher demand in the North American industrial markets with a marked improvement in larger capital projects. The company reported organic growth of 3% in the second quarter owing to a diligent execution of operational plans.
With solid quarterly results and robust demand patterns, IDEX raised its earlier guidance for 2017. The company currently expects 5% organic growth in 2017 with adjusted earnings of $4.18 to $4.23 per share, up from the earlier projection of 3–4% organic growth and adjusted earnings of $4.00–$4.17. Third-quarter 2017 adjusted earnings are expected in the range of $1.04 to $1.06 per share on organic growth of 6%. The long-term growth prospects of the company, therefore, appear to be quite encouraging.
However, IDEX operates in a highly competitive industry. Maintaining and improving its competitive position entails continued investment in manufacturing, engineering, quality standards, marketing, customer service and support, and distribution networks. This involves huge recurring R&D expenses that increase its operating costs. This also reduces IDEX’s price control over its products, which often leads to loss of market share, decline in top-line growth and lower operating margin.
Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #2 (Buy). Other stocks in the industry worth considering include Barnes Group Inc. (B - Free Report) , Graco Inc. (GGG - Free Report) and RBC Bearings Incorporated (ROLL - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Barnes has a long-term earnings growth expectation of 9%.
Graco has a long-term earnings growth expectation of 10.5%. It topped estimates in each of the trailing four quarters with an average positive earnings surprise of 23.95%.
RBC Bearings has a long-term earnings growth expectation of 8.4%. It topped estimates in each of the trailing four quarters with an average positive earnings surprise of 4.71%.
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