IDEX Corporation IEX seems to have lost its sheen due to challenging end-market conditions and various expenses that are predicted to adversely impact its earnings. Its price performance has been weak lately, while earnings estimates have been lowered too, indicating bearish sentiments for the stock.
The company has a market capitalization of $12.4 billion and a Zacks Rank #4 (Sell) at present. It belongs to the Zacks Manufacturing – General Industrial industry, currently at the bottom 22% (with the rank of 199) of more than 250 Zacks industries. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We believe that the industry is suffering from global uncertainties, unfavorable movements in foreign currencies, cost escalation — resulting from tariff woes, commodity inflation, high labor costs and freight charges — and other headwinds.
Notably, IDEX delivered weak results in fourth-quarter 2019, with earnings and sales lagging respective estimates by 1.48% and 1.46%. In the past three months, the company’s shares have declined 2.4% against the industry’s growth of 0.2%.
Factors Affecting Investment Appeal
Top-Line Woes: In fourth-quarter 2019, IDEX’s revenues declined 1.3% year over year. Organically, sales were down 2% due to uncertainties related to the soft global economy and weak demand for industrial products globally.
The company is wary about challenging industrial markets and its impact on the results of the first half of 2020. For the year, organic sales are predicted to be down 2% to flat year over year, with a decline of 4-5% expected in the first quarter. Revenues will likely be $2,465-$2,515 million in 2020, suggesting a decline of 1% to growth of 1% from that reported in 2019.
Bottom-Line Woes: The company expects adjusted earnings per share to decline 4% to rise 1% year over year to $5.55-$5.85 in 2020. Various factors are expected to play spoilsport, with 4-cents adverse impact likely from growth investments, 10 cents from tax rate and 6-10 cents from variable compensation.
Forex Woes: Presence in the international markets (contributing 50% to its revenues in 2019) exposed IDEX to geopolitical issues, macroeconomic challenges and unfavorable movements in foreign currencies. In fourth-quarter 2019, forex woes adversely affected the company’s sales by 1%.
Persistence of such issues might pose concerns for IDEX.
Bottom-Line Estimate Trend: The Zacks Consensus Estimate for the company’s earnings has been revised downward in the past 30 days. The consensus estimate for the same is currently pegged at $5.74 per share for 2020 and $6.14 for 2021, reflecting a decline of 4.7% for both years from the 30-day-ago figures.
Also, earnings estimates of $1.32 per share for the first quarter of 2020 suggest a decline of 10.8% from the 30-day-ago figure.
IDEX Corporation Price and Consensus