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Why Is Amtek (AME) Up 2.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Amtek (AME - Free Report) . Shares have added about 2.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Amtek 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 catalysts.

AMETEK (AME - Free Report) Q3 Earnings and Revenues Beat Estimates

AMETEK delivered third-quarter 2018 adjusted earnings of 82 cents per share, which beat the Zacks Consensus Estimate by 4 cents and also exceeded management’s guidance of 76-78 cents per share. The figure increased 24.2% from the year-ago quarter but declined 1.2% sequentially.

Net sales increased 10.2% on a year-over-year basis but dropped 1.6% sequentially to $1.19 billion. The figure topped the Zacks Consensus Estimate of $1.18 billion. The robust organic growth and strong segmental performance drove year-over-year growth.

AMETEK recorded organic sales growth of 7% in the reported quarter. Improved operational activities and positive contributions from acquisitions also aided the results.

We believe the company’s proper execution of its four core growth strategies of operational excellence, global market expansion, investments in product development and strategic acquisitions are expected to aid the company's business growth in the near term as well as in the long haul.

Top Line in Detail

AMETEK reports sales in two organized segments — Electronic Instruments Group (“EIG”) and Electromechanical Group (“EMG”).

EIG (62.2% of total sales): The company generated $742.04 million of sales in this segment, which was slightly down 0.3% sequentially but reflected growth of 10.5% from the year-ago quarter. The benefits from acquisitions of Arizona Instrument, Motec and Soundcom drove year-over-year growth in this segment. Further, robust organic sales in the reported quarter remained positive within this segment.

EMG (37.8% of sales): This segment generated $450.92 million of sales in the third quarter, which increased 9.1% on year-over-year basis but declined 2.9% from the previous quarter. Year-over-year growth can primarily be attributed to solid organic sales growth and positive contributions from the FMH Aerospace buyout.

Operating Details

For the third quarter, operating margin was 22.2%, expanding 100 basis points (bps) from the prior-year quarter but contracting 10 bps on a sequential basis.

Year-over-year expansion can primarily be attributed to the robust performance EIG and EMG segments, whose operating margins expanded 130 bps and 50 bps year over year. Further, operational efficiency in the reported quarter was a major positive.

Selling, general and administrative (SG&A) expenses were 12.1%, as percentage of sales, contracting 10 bps from the year-ago quarter as well as from the previous quarter.

Balance Sheet

As of Sep 30, 2018, cash and cash equivalents was $518.7 million, down from $557.7 million as of Jun 30, 2018.

Long-term debt was $1.83 billion, decreasing from $1.84 billion in the previous quarter.

Guidance

For fourth-quarter 2018, AMETEK expects sales to reflect growth of 10% on a year-over-year basis.

Earnings are anticipated to lie in the range of 82-84 cents per diluted share, reflecting year-over-year growth of 17-20%.

For 2018, the company anticipates total sales to grow by low-double digits and organic sales by mid-high single digit.

Further, AMETEK revised guided range upward for adjusted earnings per share from $3.16-$3.20 to $3.25-$3.27, reflecting growth of 25% from 2017.

 

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

At this time, Amtek 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

Amtek has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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