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Colfax (CFX) Provides Financial Projections for 4Q18 and 2019

Colfax CorporationCFX has provided details regarding its projections for 2019, especially those related to its two business platforms - Fabrication Technology, and Air & Gas Handling. The company has also briefed on its forecast for the fourth quarter of 2018.

This machinery company's shares have closed the trading session yesterday at $21.02, reflecting gain of roughly 0.4% from the previous day.

Snapshot of Q4 and 2018 Projections

For the Air & Gas Handling platform, Colfax believes that the strengthening industrial business, order wins in the mining market, and stability in the oil & gas as well as the power businesses will be beneficial. Order growth is predicted to be in double digits in the fourth quarter of 2018.

In addition, Colfax anticipates that Air & Gas Handling platform's adjusted operating margin in the fourth quarter of 2018 will be roughly 11.5-12.5%. This forecast is above 9.8% recorded in the third quarter of 2018 and 7.7% in the fourth quarter of 2017. The sequential improvement will likely be driven by restructuring initiatives, pricing actions, improved productivity and project execution.

For 2018, the Air & Gas Handling platform's adjusted earnings before interest, tax, depreciation and amortization (EBITDA) are anticipated to be approximately $200 million.

For the Fabrication Technology platform, the company anticipates Gas Control Equipment's buyout, as well as automation and new products, to support top-line results. On a year-over-year basis, core sales and benefits from acquired assets are anticipated to grow in a high single digit in the fourth quarter of 2018.

The platform's core margins are anticipated to improve sequentially in the fourth quarter while are likely to be approximately 11.5% in 2018. The full-year projection is roughly flat compared with the 2017 level and assumes more than 50 basis points (bps) of inflation impact. However, 2018 margin projection excludes the impact of 30 bps related to the acquisition of Gas Control Equipment.

For 2018, the platform's adjusted EBITDA is anticipated to be approximately $325 million. Core margin will likely be more than 12% in the first half of 2019.

For Colfax, earnings in 2018 are anticipated to be roughly $2.20-$2.30 per share, reflecting year-over-year growth of more than 25% at the mid-point.

Forecasts for 2019

For the Air & Gas Handling platform, Colfax anticipates orders to grow 3-7% year over year; including the impact of mid- to high-single-digit core growth, low-single-digit benefit from acquired assets and adverse low-single-digit impact from forex issues. End markets are predicted to improve during the year.

In addition, total sales are likely to be between 1% decline and 1% growth. Core sales growth will be roughly flat while acquisition benefits will be in a low-single digit and adverse impact from forex issues will be in a low-single digit. Adjusted operating margins are likely to improve to 11-12%. Benefits and costs related to restructuring activities are predicted to be $25 million and $20 million, respectively.

For the Fabrication Technology platform, the company predicts core sales to grow in a mid-single digit while acquisition is likely to benefit in a mid-single digit and forex woes to hurt in a low-single digit. Adjusted operating margins are likely to improve to 12.25-12.75% on the back of improved sales growth, restructuring measures and productivity gains. Benefits and costs related to restructuring activities are predicted to be $20 million and $25 million, respectively.

In addition, Colfax has communicated that it is on track to complete the acquisition of DJO Global Inc. in the first three months of 2019. Further, it is looking for options for its Air & Gas Handling platform.

Adjusted operating profit is anticipated to increase more than 20% in 2019 while tax rate is estimated to be in low 20s.

Zacks Rank & Stocks to Consider

With a market capitalization of nearly $2.5 billion, Colfax currently carries a Zacks Rank #3 (Hold). The company stands to gain from healthy fabrication technology business, acquired assets, pricing actions and operational efficacy. It's worth mentioning here that DJO Global buyout (anticipated to be complete in the first three months of 2019) will mark the company's entry into the orthopedic solutions industry, which currently benefits from tailwinds like changing demographics and rising need for preventive healthcare among others.

Despite all these positive aspects, inflation in material costs, unfavorable movements in foreign currencies and restructuring expenses might be detrimental to the company's financials. In the past month, the company's share price has declined 14.8% against 7.4% growth recorded by the industry it belongs to.

In the past 60 days, the company's earnings estimates for 2018 have been increased by five brokerage firms and decreased by four. Further, estimates for 2019 were increased by eight firms and decreased by two. Currently, the Zacks Consensus Estimate for earnings remained unchanged at $2.25 for 2018 while grew 2.4% to $2.56 for 2019 from the 60-day-ago tally.

Colfax Corporation Price and Consensus

Colfax Corporation Price and Consensus | Colfax Corporation Quote

Some better-ranked stocks in the industry are DXP Enterprises, Inc. DXPE , EnPro Industries, Inc. NPO and Luxfer Holdings PLC LXFR . All these stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

In the past 60 days, earnings estimates for all these three stocks improved for the current year. Further, positive earnings surprise for the last quarter was 17.95% for DXP Enterprises, 23.64% for EnPro Industries and 60.61% for Luxfer.

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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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