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Here's Why You Should Consider Buying Colfax (CFX) Stock Now

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We believe that Colfax Corporation (CFX - Free Report) is a solid choice for investors seeking exposure in the machinery space. New product innovations, strengthening end-market demand and cost savings from restructuring efforts will be beneficial. Acquired assets and divested business solidifies its core business and add to the company’s investment appeal.

The stock was upgraded to a Zacks Rank #1 (Strong Buy) on Jan 17. It currently has a market capitalization of approximately $5.1 billion.

Why the Upgrade?

Market sentiments are positive for Colfax. In the last month, the company’s shares have yielded 7.4% return, outperforming 4.6% gain of the industry it belongs to.



Also, the company’s earnings estimates for 2018 have been revised upward by six brokerage firms and lowered by one in the last 60 days. The Zacks Consensus Estimate stands at $2.13 for 2018, reflecting increase of 20.3% from the tally 60 days ago.

Colfax Corporation Price and Consensus
 

Colfax Corporation Price and Consensus | Colfax Corporation Quote

In 2018, Colfax anticipates that ESAB — a popular brand under the Fabrication Technology business — will gain from new products, strengthening regional market conditions and benefits from acquired assets. Also, the company believes that Howden’s — a well-known brand under the Air & Gas Handling business — growth will be driven by industrial and mining industries, recovering oil & gas market and initiatives to boost margins.

In addition to strong brand recognition, Colfax expects meaningful acquisitions to support growth in unexplored markets and new business platforms. Also, divestment of assets is the company’s another way of strengthening its core businesses. In this regard, the acquisition of Siemens AG’s Siemens Turbomachinery Equipment GmbH business in October and divestment of Fluid Handling business to CIRCOR in December are worth mentioning. While the buyout will solidify the company’s Howden trading platform, the divestiture will result in material gain in the four quarter of 2017.

Based on these positive aspects, Colfax anticipates earnings per share from continuing operations in 2018 to grow 20% over 2017 prediction to $1.65-$1.80. Adjusted earnings per share are predicted to be within $2.00-$2.15 per share. Organic revenue growth in the year is estimated to be flat to up 2%. Orders for aftermarket services and from general industrial market will improve in 2018. Oil & gas orders are likely to pick up in the second half while that from the power industry will fall during the year. Restructuring measures will lead to $25-$30 million in saving.

Colfax is likely to release its 2017 results on Feb 1, 2018. Earnings per share are anticipated to be in the $1.65-$1.75 per share range. Excluding the contribution from the divested Fluid Handling assets, earnings from continuing operating is expected to come within $1.37-$1.47.

The Zacks Consensus Estimate for the year is currently pegged at $1.71.

Other Stocks to Consider

Other stocks worth considering in the industry are Sun Hydraulics Corporation (SNHY - Free Report) , Barnes Group, Inc. (B - Free Report) and Illinois Tool Works Inc. (ITW - Free Report) . While Sun Hydraulics sports a Zacks Rank #1, both Barnes Group and Illinois Tool Works carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sun Hydraulics’ earnings estimates for 2018 have improved in the last 60 days. Also, the company pulled off an average positive earnings surprise of 9.58% in the last four quarters.

Barnes Group delivered an average positive earnings surprise of 9.02% in the last four quarters. Its earnings expectations for 2018 have improved over the past 60 days.

Illinois Tool Works’ earnings estimates for 2018 were revised upward in the last 60 days. Also, it delivered an average positive earnings surprise of 3.29% in the last four quarters.

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