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Colfax Beats Q4 Earnings & Revenues, Maintains '16 Outlook

Machinery company Colfax CorporationCFX reported better-than-expected results for fourth-quarter 2015. Adjusted earnings came in at 51 cents per share, surpassing the Zacks Consensus Estimate of 43 cents. However, the results declined 29.2% from the year-ago tally of 72 cents. The bottom-line performance was adversely affected by weak revenue generation, partially offset by benefits reaped from reduction in expenses.

For 2015, Colfax's adjusted earnings were $1.60 per share; down from $2.20 per share earned in 2014 but beating the Zacks Consensus Estimate of $1.53 per share.

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Revenues

Colfax's top-line performance in the quarter was weak, as net sales declined 12% year over year to $1,061.5 million. However, the top line surpassed the Zacks Consensus Estimate of $1,016 million.

As revealed, the year-over-year decline in revenues was triggered by a 3.8% fall in existing business revenues and 10.2% negative impact from foreign currency translation, partially offset by a 2% gain from acquisitions.

Colfax reports its net sales under two heads/segments. The segmental results are briefly discussed below:

Revenues from the Gas and Fluid Handling segment totaled $572.8 million, down 7.9% year over year. Organically, revenues were down 2.7%, primarily owing to sales decline in power generation, mining, and general industrial and other end-markets.

Revenues from the Fabrication Technology segment fell 16.4% year over year to $488.7 million due to lower volumes, an unfavorable price mix and adverse impact from foreign currency translations. The segment's organic revenues were down 4.8% year over year.

In the quarter, Colfax's orders totaled $127.1 million, down 22.3% year over year; while backlog stood at $1,140.9 million.

Margins

Colfax's margin profile weakened in fourth-quarter 2015 due mainly to negative impact from lower revenue generation, partially offset by a decline in costs and expenses. Cost of sales in the quarter fell 10.6% year over year, representing 68.6% of net sales as against 67.5% in the year-ago quarter. Gross margin decreased 110 basis points (bps) year over year to 31.4%. Selling, general and administrative (SG&A) expenses, as a percentage of revenues, were 21.9% as against 21.1% recorded in the year-ago quarter.

Adjusted operating income declined 26.4% year over year, while margin fell 180 bps to 9.5%.

Balance Sheet and Cash Flow

Exiting fourth-quarter 2015, Colfax had cash and cash equivalents of $197.5 million, down from $221.2 million in the preceding quarter. Long-term debt decreased 7.9% sequentially to $1,411.8 million.

In 2015, Colfax's net cash generated from operating activities decreased 21.2% year over year to $303.8 million. Capital spending in the year totaled $69.9 million, down 17.3% year over year. During the year, Colfax repurchased shares worth $27.4 million.

Outlook

For 2016, Colfax reaffirmed its financial goals which were unveiled at its investor day held in Dec 2015. Adjusted earnings is projected within $1.40−$1.55 per share.

The company expects organic revenues to be down 3.5−6%, including 5−7% drop in Fabrication Technology, 3−6% in Howden and 0−3% in Colfax Fluid Handling. Total revenue is predicted in a range of $3.6−$3.75 billion, including approximately $140−$150 million of adverse impact from foreign currency translations. Adjusted tax rate will likely be 28−30%, while interest expense is projected to be $50 million.

Also, management communicated that it is on track to generate roughly $100 million in cost savings by the end of 2016 from its cost base in 2014.

With a market capitalization of $3.1 billion, Colfax currently carries a Zacks Rank #5 (Sell). Better-ranked stocks in the machinery industry include Komatsu Ltd. KMTUY , Astec Industries, Inc. ASTE and The Manitowoc Company, Inc. MTW . While Komatsu sports a Zacks Rank #1 (Strong Buy), both Astec Industries and The Manitowoc carry a Zacks Rank #2 (Buy).

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ASTEC INDS INC (ASTE): Free Stock Analysis Report

MANITOWOC INC (MTW): Free Stock Analysis Report

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COLFAX CORP (CFX): Free Stock Analysis Report

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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 Nasdaq, Inc.


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

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