A month has gone by since the last earnings report for Colfax Corporation (CFX - Free Report) . Shares have lost about 4.2% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 catalysts.
Second-Quarter 2017 Highlights
Colfax Corporation reported adjusted earnings of $0.43 per share in second-quarter 2017, matching the Zacks Consensus Estimate. However, earnings were above the year-ago quarter's tally of $0.41 by 4.9%.
The year-over-year improvement was backed by organic revenue growth and gains from acquired assets. Notably, the company completed acquiring two assets in the Fabrication Technology segment, strengthening its welding process analytics and robotic welding torches operations. However, higher cost of sales played spoilsport while lower operating and interest expenses helped in profitability improvement.
Net sales generated were $965.8 million, rising 0.9% year over year. Growth of 0.5% in existing businesses and 1.1% gain from acquired assets were partially offset by 0.7% negative impact from adverse foreign currency movements.
Also, the top line topped the Zacks Consensus Estimate of $938 million by 2.95%.
Segmental Revenues: Colfax reports its net sales under two heads/segments. The segmental results are briefly discussed below:
Revenues from Gas and Fluid Handling totaled $471 million, down 2.6% year over year. The decline was triggered by 1.2% fall in the existing businesses and 1.4% adverse impact from foreign currency translations.
Year to date, organic sales declined 22% in oil, gas & petrochemical, 5% in power generation and 1.8% in general industrial & other end markets. These negatives were partially offset by 48.1% gain in mining and 1.6% growth in marine end markets.
The segment's orders were worth $457.8 million at the end of the quarter, up 5.8% year over year. Backlog was $1,096.1 million.
Revenues from Fabrication Technology grew 4.5% year over year to $494.8 million due to 2% positive impact from price/mix, 2.3% gain from acquired assets, 0.1% rise in volume and 0.1% positive impact from foreign currency translations.
Margins: In the quarter, Colfax's cost of sales increased 1.4% year over year, representing 68.9% of net sales compared with 68.5% in the year-ago quarter. Gross margin decreased 40 basis points (bps) year over year to 31.1%. Selling, general and administrative expenses, roughly 21.6% as a percentage of revenues, declined 2.5% year over year.
Adjusted operating income grew 5.6% year over year while margin grew 50 bps to 9.6%.
Balance Sheet and Cash Flow: Exiting the second quarter, Colfax had cash and cash equivalents of $272.2 million, up from $207.8 million at the previous quarter end. Long-term debt balance grew 6.2% sequentially to $1,322.4 million.
In first-half 2017, the company generated net cash of $98.6 million from its operating activities, up from $56.4 million in the year-ago quarter. Capital spending totaled $10.6 million, decreasing 58.2% year over year.
Outlook: For 2017, Colfax anticipates benefiting from its organic and inorganic growth initiatives as well as from improving end-market conditions. It predicts the Gas and Fluid segment to witness organic growth in the third quarter.
The company increased its adjusted earnings guidance to $1.65-$1.75 per share from the previous projection of $1.60-$1.75. The mid-point now stands at $1.70 versus $1.675 earlier.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
At this time, Colfax's stock has a subpar Growth Score of D, however its Momentum is lagging a bit with a F. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is solely suitable for value investors.
The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.