Ametek Inc. (AME): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
AMETEK reported better-than-expected third quarter results with both the top and bottom lines beating the Zacks Consensus Estimate. Guidance was also in line with expectations. The company excels in making strategic acquisitions, driving operational efficiencies on an ongoing basis, introducing new products and taking its core competencies to the global marketplace, all of which play an important role in driving its growth. A word of caution may be in order however, considering the weakness in its balance sheet and problems like integration issues and an overly high goodwill associated with an extremely aggressive acquisition strategy. We are therefore maintaining Neutral recommendation on AMETEK shares.

Overview:

AMETEK Inc. (AME), located in Berwyn, PA, is a leading worldwide manufacturer of electronic appliances and electromechanical devices. AMETEK has more than 120 operating sites all over the world and over 80 sales and service stations in North America, Europe, Asia and South America to support these operations.

AMETEK sells its products globally through two major operating groups, the Electronic Instruments Group ("EIG") and the Electromechanical Group ("EMG").

The Electronic Instruments Group ("EIG") (43% of total revenue in 2013) specializes in manufacturing instruments employed for monitoring, examining, calibration and display purposes in the aerospace, power and industrial instrumentation markets. The segment is one of the leaders in many of the markets it serves, including airframe and aircraft engine sensors process and analytical instruments electric power generation, distribution and transmission instruments and heavy-vehicle instrument panels. EIG has 64 operating facilities in countries including the United States, the United Kingdom, China and Germany. EIG derives its revenues from Process and Analytical Instrumentation Markets and Products, which contributed 70% of total EIG sales in 2013 and includes process analyzers, emission monitors and spectrometers Power and Industrial Instrumentation Markets and Products, which generated 21% of total sales and comprises analytical instruments, power supply systems and programmable power supplies for industrial use and Aerospace Instrumentation Markets and Products, which contributed 9% of EIG's 2013 net sales and includes airborne data systems, turbine engine temperature measurement products and vibration-monitoring systems.


The Electromechanical Group ("EMG") (57% of total revenue in 2013) produces highly engineered electrical connectors and electronics packaging for electronic applications in aerospace, defense, medical and industrial markets. In addition, it manufactures advanced technical motor and motion control products used in electronic data storage, medical appliances, company equipment, robotics and many other applications. It is also engaged in the production of precision motion control solutions, specialty metals and alloys electric motors, blowers and heat exchangers. The target customers are aerospace and defense industries, commercial and fitness equipment makers, food and beverage machine builders, and manufacturers of hydraulic pumps, industrial blowers and vacuum cleaners. EMG has 65 operating facilities in countries including the United States, the United Kingdom, China and France. EMG derives its revenues from Differentiated Businesses, which contributed 85% of total EIG sales in 2013 and includes technical motors and systems, engineered materials, interconnects and packaging products Technical Motors and Systems Markets and Products, which added 54% to total sales and comprises brushless motors, blowers and pumps and heat exchangers Engineered Materials, Interconnects and Packaging Markets and Products which contributed 31% of EIG's 2013 net sales and includes electrical connectors, terminals and headers and Floorcare and Specialty Motor Markets and Products, which contributed 15% of EIG's 2013 net sales and includes motors and motor-blowers which are used in floor care products, canister and upright vacuums.

Geographically, AMETEK generated 45.0% of fiscal 2013 revenue from North America (US), 23.0% from Europe (UK & European Union countries), 19.0% from the Asia, the remaining 13.0% from others.

End markets include aerospace, defense mass transit, medical, office products and other industrial markets. The company uses a direct sales model for the distribution of its products, which is supplemented by distributors and sales representatives as necessary.

Given the scale of operations, the company has a host of competitors, including Agilent Technologies, Emerson Electric and Cognex.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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