Mettler-Toledo International, Inc. (MTD - Free Report) reported fourth-quarter 2019 adjusted earnings of $7.78 per share, beating the Zacks Consensus Estimate by 1.2%. The figure improved 14% on a year-over-year basis and 34.8% sequentially.
Net sales of $843.97 million were up 3.2% year over year and 11.9% from the prior quarter. The figure surpassed the Zacks Consensus Estimate of $840.17.
The well-performing Laboratory and Industrial product lines drove the top line. Further, the company’s solid momentum across Americas and Asia contributed to the quarterly results.
However, unfavorable foreign exchange fluctuations and tariffs remained overhangs. Further, sluggishness in the food retail business continued to act as a headwind.
Further, the company’s shares plunged 3.7% in the pre-market trading, which can primarily be attributed to lower-than-expected earnings guidance for the current quarter and the full year.
Market uncertainties, coronavirus impact, trade was between the United States and China, and foreign currency risks remain headwinds.
Nevertheless, 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 anticipated to continue driving business.
Coming to the price performance, shares of Mettler-Toledo have gained 17.6% over a year, outperforming the industry’s rally of 4.9%.
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 sales growth of 6% in local currency on a year-over-year basis. This can be attributed to portfolio strength and solid demand across pharmaceutical and life science end-market.
Industrial Segment: The company generated 41% of net sales from this segment. Further, sales reflected year-over-year growth of 2%. This can primarily be attributed to well performing core industrial business, which improved 4% year over year owing to solid market demand, and growing momentum across Spinnaker sales and marketing initiatives.
However, the product inspection business remained flat year over year due to sluggish spending by large food manufacturers.
Food Retail: Mettler-Toledo generated 6% of sales from the food retail business. However, the sales declined 2% from the prior-year quarter on account of sluggish market demand.
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 6% in local currency year over year. This was driven by well-performing Laboratory segment and core industrial business.
Europe: This region contributed 31% to the company’s net sales in the reported quarter. Sales in this region increased 1% year over year, owing to strong performance by Laboratory segment.
However, sluggish performance of core industrial and product inspection businesses in this region was an overhang.
Asia/Rest of the World: The company generated sales of 31% from this region, reflecting growth of 5% on a year-over-year basis. This can primarily be attributed to strong performance of the company in China owing to strong momentum across digital lab business and Industrial segment.
However, softness in retail business remains a headwind.
Gross margin was 59%, expanding 60 basis points (bps) year over year.
Research & development (R&D) expenses were $35.3 million, down 2.5% from the year-ago quarter. Selling, general & administrative (SG&A) expenses increased 2.5% year over year to $206.7 million.
As a percentage of sales, both R&D and SG&A expenses contracted 20 bps each on a year-over-year basis.
Adjusted operating margin was 30.4%, which expanded 110 bps from the prior-year quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2019, the company’s cash and cash equivalents balance was $207.8 million, up from $120.5 million as of Sep 30, 2019.
Long-term debt was $1.23 billion, increasing from $1.12 billion in the previous quarter.
Mettler-Toledo generated $201.7 million of cash from operating activities, up from $175.9 million in the prior quarter. Free cash flow was $186.2 million during the reported quarter.
For first-quarter 2020, Mettler-Toledo anticipates sales growth between 0% and 1% on a year-over-year basis in local currency. The Zacks Consensus Estimate for sales is pegged at $684.8 million.
The company expects coronavirus outbreak to hurt sales in China in the fiscal first quarter significantly.
Adjusted earnings are anticipated in the range of $4.20-$4.30 per share, suggesting year-over-year growth of 2-5%. The Zacks Consensus Estimate for earnings is pegged at $4.45 per share.
Foreign exchange headwinds and negative impacts of tariffs thanks to U.S.-China trade dispute remain concerns.
For 2020, the company anticipates sales growth of 4% in local currency. The Zacks Consensus Estimate is pegged at $3.10 billion.
The company’s guidance for adjusted earnings lies in the range of $24.85-$25.10 per share, reflecting year-over-year growth of 9-10%. The Zacks Consensus Estimate for earnings is pegged at $25.02 per share.
Zacks Rank & Key Picks
Mettler-Toledo currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Itron, Inc. (ITRI - Free Report) , NetEase, Inc. (NTES - Free Report) and Five9, Inc. (FIVN - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate for Itron, NetEase and Five9 is currently pegged at 25%, 41.99% and 10%, respectively.
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