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Ametek Q2 Earnings In Line, Rev Up Y/Y - Analyst Blog

By: Zacks.com
Posted: 8/8/2013 11:10:00 AM
Referenced Stocks: AME;EIG;NATI;SNDK;SYNT

Ametek Inc. ( AME ) reported second-quarter 2013 earnings per share of 52 cents, in line with the Zacks Consensus Estimate.

Revenues

The company reported revenues of $878.8 million, down 0.5% sequentially but up 6.4% year over year. The year-over-year increase was due to strong demand in the Electronic as well as Electro mechanical segments.

During the quarter, orders grew 2.0% from the year-ago quarter to $895.0 million. The book-to-bill ratio was 1.02.

Revenues by Business Segments

Electronic Instruments Group (EIG) comprised 55% of Ametek's sales in the quarter, up 6.9% from the year-ago quarter to $483.3 million. The second quarter was strong due to strength in Aerospace and oil and gas businesses, combined with the contribution from the Micro-Poise acquisition.

Ametek's Electro Mechanical Group (EMG) segment generated 45% of its sales, up 5.8% from the year-ago quarter to $395.5 million. Management stated that the strong growth in Floorcare and Specialty Motors business and the Dunkermotoren acquisition led to the top-line increase.

Margins

Reported gross margin for the quarter was 35.4%, up 40 bps sequentially but down 20 basis points (bps) year over year. The sequential increase was due to a favorable mix.

Operating expenses (SG&A and Depreciation) of $108.6 million were down 0.5% from $109.1 million in the year-ago quarter. The reported operating margin was 23.1%, up 70 bps from the year-ago quarter margin of 22.4%. Selling, general and administrative (SG&A) expenses decreased as a percentage of sales, while depreciation expenses remained the same.

Reported net income was $128.3 million or earnings per share of 52 cents compared with $113.7 million or 47 cents in the comparable quarter last year. As there were no special items other than stock-based compensation expenses, adjusted net income was the same as GAAP net income in the quarter.

Balance Sheet

The company ended the second quarter with cash and short-term investments balance of $207.6 million, up from $177.3 million in the prior quarter. Trade receivables were $521.5 million, down from $529.2 million in the prior quarter.

Cash flow from operations was $128 million, up 11.0% year over year. Free cash flow was $117 million in the quarter.

Guidance

For the third quarter of 2013, Ametek expects total revenue to be up in mid-single digits over the year-ago quarter revenues. Earnings per share are expected to be in the range of 51 to 52 cents, up 9% to 11% year over year.

For 2013, management expects revenues to be up in mid single digits on a year- over-year basis. Earnings are expected to be at the low end of the previously guided range of $2.08 to $2.12 per share.

Conclusion

Ametek manufactures and sells electronic instruments and electromechanical devices. The company reported a decent second quarter with both earnings and revenues increasing year over year.

We remain encouraged by the improving order rates in the quarter. Also, the company gave modest third quarter guidance but lowered its earnings expectations for 2013, reflecting a weak economic environment.

We believe that Ametek's new products, acquisitions and global market expansion will continue to drive growth. We also remain optimistic about its long-term prospects and contend that its restructuring activities will reduce operating expenses. The company stated that it expects $100 million of cost savings in 2013.

Currently, Ametek has a Zacks Rank #4 (Sell). Other stocks that are performing well at current levels include SanDisk ( SNDK ) and Syntel Inc. ( SYNT ), carrying a Zacks Rank #1 (Strong Buy), and National Instruments ( NATI ), carrying a Zacks Rank #2 (Buy).



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