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Why Is Mettler-Toledo (MTD) Up 6.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Mettler-Toledo (MTD - Free Report) . Shares have added about 6.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Mettler-Toledo 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.

Mettler-Toledo Beats on Q1 Earnings, Revenues Up Y/Y

Mettler-Toledo International delivered first-quarter 2019 adjusted earnings of $4.10 per share, beating the Zacks Consensus Estimate by 4 cents and also came ahead of management’s guided range of $4-$4.05 per share. The figure increased 10% on a year-over-year basis but declined 40.1% sequentially.

Net sales of $679.45 million were up 3% year over year but decreased 16.9% from the previous quarter. In local currency, sales grew 7% from the year-ago quarter, exceeding management’s expectation of 5.5% growth. Further, the figure surpassed the Zacks Consensus Estimate of $674.29 million.

The robust performance of Laboratory and Industrial product lines drove the top line. Further, the company’s solid momentum in China and Europe aided growth. The company remains confident on growth strategies that include productivity and margin initiatives. Moreover, Mettler-Toledo’s continued investments in product portfolio expansion, field force, Spinnaker sales and marketing programs are expected to continue benefiting business growth.

Top Line in Detail

By Segments: The company reports in three segments — Laboratory Instruments, Industrial Instruments and Food Retail Weighing Solutions.

Laboratory Segment: This segment accounted for 53% of net sales in the reported quarter. The company witnessed 8% sales growth on a year-over-year basis. This was driven by robust Process Analytics, Analytical Instruments and pipettes. Further, investments in biopharma area, Spinnaker sales, marketing initiatives and R&D contributed to the segment.

Industrial Segment: The company generated 40% of net sales from this segment. Further, sales exhibited year-over-year growth of 8%. This can primarily be attributed to well performing product inspection business, which exhibited growth of 6% on a year-over-year basis. Further, core industrial business which improved 9% year over year on the back of Spinnaker sales and marketing efforts continued to drive the segment’s growth.

Food Retail: Mettler-Toledo generated 7% of sales from the food retail business. However, the sales declined 5% from the prior-year quarter, owing to nature of the project.

By Geography

The company reports total sales figure from Americas, Europe and Asia/Rest of the World.

Americas: Mettler-Toledo generated 38% of sales from this region, up 3% year over year. This was driven by well-performing core industrial and product inspection business. Further, robust Laboratory segment contributed to the first-quarter results. However, retail business underperformed in this region.

Europe: This region contributed 31% to the net sales of the company in the reported quarter. Sales in this region grew 9% year over year which can be attributed to strong performance of core industrial and product inspection businesses. Further, robust Laboratory and Food Retailing product lines contributed to the reported quarter.

Asia/Rest of the World: The company generated 31% of sales from this region, reflecting growth of 9% on a year-over-year basis. This can primarily be attributed to strong performance of the company in China. Further, strong Laboratory and Industrial product lines drove sales.

Operating Results

Gross margin was 57.2%, expanding 50 bps year over year, on the back of productivity and pricing.

Research & development (R&D) expenses were $36.05 million, up 3.9% from the year-ago quarter. Selling, general & administrative (SG&A) expenses increased 1.9% year over year to $204.43 million.

Adjusted operating margin was 21.8%, expanding 70 bps from the prior-year quarter.

Balance Sheet and Cash Flow

As of Mar 31, 2019, the company’s cash and cash equivalents balance was $126.5 million, down from $178.1 million as of Dec 31, 2018.

Long-term debt was $1 billion, rising from $985 million in the previous quarter.

Mettler-Toledo generated $98.8 million of cash from operating activities, up from $198.6 million in the prior quarter. Free cash flow was $80.2 million during the reported quarter.

 

Guidance

For second-quarter 2019, Mettler-Toledo expects sales growth of 5.5% in local currency.

Adjusted earnings are anticipated in the range of $5.05-$5.10 per share, reflecting year-over-year growth of 9-10%.

For 2019, the company raised expectation for sales growth from 5% to 5.5% in local currency.

The company also revised the guidance for adjusted earnings upwards to $22.55-$22.75 per share from $22.5-$22.7 per share.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Mettler-Toledo has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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


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