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Colfax Lags Q3 Earnings and Revenues, Cuts 2014 Outlook - Analyst Blog

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Colfax Corporation ( CFX ) reported lower-than-expected results for third-quarter 2014, with adjusted earnings of 57 cents per share missing the Zacks Consensus Estimate of 61 cents by 6.6%. However, the bottom line improved 1.8% year over year.

Colfax Corporation - Earnings Surprise | FindTheBest

Revenues

Colfax generated net sales of $1,164.5 million, reflecting an increase of 14.8% year over year. The improvement can be attributed to a 19.9% contribution from acquisitions, partially offset by a 3.8% decline in organic revenues and 1.3% negative impact from foreign currency translation.

However, the top line lagged the Zacks Consensus Estimate of $1,193 million.

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

The Gas and Fluid Handling segment generated sales of $564.7 million, increasing 10.4% year over year. Organically, revenues were down 5.3%, due primarily to sales decline in end markets like power generation, general industrial and oil, gas & petrochemical.

Revenues from the Fabrication Technology segment rose 19.2% year over year to $599.8 million. The segment's organic revenue was down 2.3% year over year due to a 5.5% volume decline, partially offset by a 3.2% gain from favorable price/mix.

Total orders inched up 1.1% year over year to $539.4 million, while backlog stood at $1,506.5 million at the end of nine months ending Sep 30.

Margins

Colfax's cost of sales increased 14% and represented 68% of total revenue as against 68.4% in the year-ago quarter. Gross margin edged up 40 basis points year over year to 32%. Selling, general and administrative (SG&A) expenses, as a percentage of revenue, were 21.1%, against 20.6% recorded in the year-ago quarter.

Adjusted operating income grew 13.9% year over year to $127.8 million while margin came in at 11% versus 11.1% in the year-ago comparable quarter.

Balance Sheet and Cash Flow

Exiting third-quarter 2014, Colfax had cash and cash equivalents of $286.6 million, down compared with $334 million at the end of the preceding quarter. Long-term debt decreased 11.2% sequentially to $1,608.2 million.

In the nine months ended Sep 26, Colfax generated cash of $201.5 million from its operating activities versus $186.8 million in the year-ago comparable period. Capital spending amounted to $59.1 million, up 16% year over year.

Outlook: For 2014, Colfax lowered its sales guidance to a range of $4.675−$4.725 billion from the prior projection of $4.7−$4.8 billion.

Adjusted earnings are estimated within $2.11−$2.18 per share, down from $2.20−$2.35 forecasted previously. Generally Accepted Accounting Principles (GAAP) earnings per share are expected in the range of $2.24−$2.35 versus the prior expectation of $2.31−$2.57.

Tax rate is predicted within 29−30%, while interest expense is expected to be nearly $56 million.

With a market capitalization of $6.7 billion, Colfax currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include AO Smith Corp. ( AOS ), Manitex International, Inc. ( MNTX ) and Nordson Corporation ( NDSN ). All these stocks 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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