We recently downgraded our recommendation from Outperform to
), anticipating it to perform in line with the market.
COLFAX CORP (CFX): Free Stock Analysis Report
DXP ENTERPRISES (DXPE): Free Stock Analysis
MIDDLEBY CORP (MIDD): Free Stock Analysis
XYLEM INC (XYL): Free Stock Analysis Report
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Colfax is one of the leading manufacturing and engineering
companies specializing in products and services related to gas
and fluid-handling and fabrication technology. Acquisitions, over
time, have played an important role in strengthening the
Recently the company signed agreements to acquire the Global
Infrastructure and Industry (GII) business of Flakt Woods Group
and CKD Kompresory a.s. from CKD Group. Both the acquisitions
will strengthen the company's Howden business.
Also, strong end markets, exposure to emerging markets as well as
leading brands makes this company a long-term winner. The company
targets organic growth of 1-2% above GDP growth, operating
margins in the mid-teens level and free cash flow in excess of
net income over the long run. Growth of roughly 4-6% is expected
for Howden products, 6% for Mining, 9% for Power/Environment,
5-7% for Colfax Fluid Handling and 3% for Fabrication
Results in the third quarter of 2013 were impressive; however,
management's outlook for the rest of 2013 forces us to downgrade
For the fourth quarter of 2013, management of Colfax anticipates
organic revenue growth in the mid-to-high digit level for Gas and
Fluid Handling segment but flat-to-down for Fabrication
Technology. Earnings per share guidance for 2013 has been lowered
to $1.98-$2.03 from $1.95-$2.10 expected earlier.
Moreover, international businesses expose Colfax to risks arising
from negative foreign currency translation and geo-political
issues, among others. Also, active competition in the gas and
fluid-handling as well as fabrication technology businesses from
both larger and smaller companies raise our concern.
Other Stocks to Consider
Colfax Corporation currently has a market capitalization of $5.9
billion and carries a Zacks Rank #3 (Hold). Some better-ranked
stocks in the industry are
DXP Enterprises, Inc.
). While Xylem carries a Zacks Rank #1 (Strong Buy), DXP
Enterprises and Middleby holds a Zacks Rank #2 (Buy).