Colfax Gains from Diversified Business, Runs Near-Term Risks - Analyst Blog

On Apr 15, 2015, we issued an updated research report on Colfax CorporationCFX . One of the leading manufacturing and engineering companies, the firm specializes in products and services related to gas & fluid handling and fabrication technology.

Colfax holds solid growth potential, backed by its diversified product portfolio and exposure to emerging markets. The company has set for itself some long-term targets, which include achievement of organic growth 1−2% higher than Gross Domestic Product (GDP) growth, operating margin in the mid-teens level and above 15% earnings growth.

Also, acquisitions remain Colfax's preferred mode for expanding its business opportunities. In 2014, the company spent approximately $949 million on acquisitions (net of cash received), while revenues from acquired assets added 13.7% to the top-line growth. In the quarters ahead, the company expects to reap incremental benefits from acquisitions.

However, its long-term growth prospects notwithstanding, Colfax is exposed to headwinds like uncertain economic conditions, foreign currency translation and geopolitical issues. These can impair its performance in the near term.

For 2015, Colfax anticipates difficult operating conditions in the countries its serves. Demand will likely remain sluggish, while adverse foreign currency movements will impact both the top and bottom line. Taking into account these negatives, the company has lowered its sales guidance to a range of $4.250−$4.4 billion and adjusted earnings to the range of $2.03−$2.23 per share. Also, the revenue prediction is below $4.6 billion generated in 2014.

The Zacks Consensus Estimate for Colfax is currently pegged at $2.10 for 2015 and $2.40 for 2016, representing a year-over-year decline of 4.8% for 2015 and growth of 14.7% for 2016.

With a market capitalization of $6.1 billion, Colfax Corporation currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include RBC Bearings Inc. ROLL , AO Smith Corp. AOS and Astec Industries, Inc. ASTE . While RBC Bearings sports a Zacks Rank #1 (Strong Buy), both AO Smith and Astec Industries carry a Zacks Rank #2 (Buy).

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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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