It has been about a month since the last earnings report for Ametek (AME Quick QuoteAME - Free Report) . Shares have added about 16.3% in that time frame, outperforming the S&P 500.

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

AMETEK Beats Q1 Earnings Estimates, Lags Revenues

AMETEK reported first-quarter 2020 adjusted earnings of $1.02 per share, which beat the Zacks Consensus Estimate by 6.3% and came within management’s guidance of $1.01-$1.04. The figure improved 2% from the year-ago quarter and 1.9% sequentially.

Net sales declined 6.6% on a year-over-year basis and 7.9% sequentially to $1.20 billion. Further, the top line fell missed the Zacks Consensus Estimate of $1.23 billion.

Disruptions caused by rapidly spreading COVID-19 led to declined in the company’s top line. The coronavirus pandemic affected both Electronic Instruments Group (EIG) and Electromechanical Group (EMG) segments during the reported quarter.

The company had withdrawn full-year guidance in its recently released business update and has refrained from providing further updates owing to coronavirus-induced uncertainties in the demand environment.

Nevertheless, the company’s proper execution of the four core growth strategies of operational excellence, global market expansion, investments in product development and acquisitions are expected to continue aiding financial growth in the near term as well as the long haul. Moreover, the AMETEK Growth Model is likely to continue driving the company’s business performance.

Segments in Detail

EIG (64.4% of total sales): The company generated $774.2 million of sales from this segment, reflecting a decline of 4% from the year-ago quarter. This can primarily be attributed to the coronavirus pandemic. Nevertheless, benefits from acquisitions of Rauland, Mocon, Telular and Gatan remained positive during the reported quarter.

EMG (35.6% of sales): This segment generated $427.9 million of sales in the first quarter, which decreased 11% on a year-over-year basis. Coronavirus-induced headwinds were major negatives. Nevertheless, the company witnessed strong operational performance within the segment.

Operating Details

For the first quarter, operating expenses were $970.2 billion, down 3.4% year over year. However, the figure expanded 270 basis points (bps) from the year-ago quarter as a percentage of net sales.

Consequently, operating margin was 19.3%, which contracted 260 bps from the year-ago reported figure.

Segment wise, operating margins for EIG and EMG were 22.1% and 17.9%, contracting 310 bps and 260 bps, respectively, on a year-over-year basis.

Balance Sheet

As of Mar 31, 2020, cash and cash equivalents were $1.25 billion, significantly up from $393.03 million as of Dec 31, 2019.

Further, inventories amounted to $654.3 million at the end of the first quarter compared with $624.6 million at the end of the prior quarter.

Long-term debt was $2.7 billion in the reported quarter, up from $2.3 billion in the prior quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -9.76% due to these changes.

VGM Scores

At this time, Ametek has a great Growth Score of A, a grade with the same score on the momentum front. 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

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Ametek has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.