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Colfax Tops Q4 Earnings but Lags on Revenues, Cuts Outlook - Analyst Blog

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Colfax Corporation ( CFX ) reported better-than-expected results for fourth-quarter 2014. Adjusted earnings came in at 72 cents per share, up 18% from 61 cents earned in the year-ago quarter. The bottom line also surpassed the Zacks Consensus Estimate of 64 cents per share.

For 2014, Colfax's adjusted earnings were $2.20 per share, up compared with $2.04 per share in 2013 and above the Zacks Consensus Estimate of $2.12.

Colfax Corporation - Earnings Surprise | FindTheBest

Revenues

Colfax's net sales in the quarter totaled $1,206.4 million, reflecting an increase of 3% over the year-ago tally. The improvement can be attributed to a 13.3% contribution from acquisitions, partially offset by a 3.4% decline in organic revenues and 6.9% negative impact from foreign currency translation.

However, the top line lagged the Zacks Consensus Estimate of $1,272 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 $622.1 million, decreasing 4.4% year over year. Organically, revenues were down 5.3%, due primarily to sales decline in power generation, marine and oil, gas & petrochemical end-markets.

Revenues from the Fabrication Technology segment rose 12.2% year over year to $584.3 million. The segment's organic revenue was down 1.1% year over year owing to lower volumes in the quarter.

Total orders inched up 4.1% year over year to $570.1 million, while backlog stood at $1,402.3 million at the end of fourth-quarter 2014.

For 2014, the company generated net sales of $4,624.5 million, up 9.9% year over year.

Margins

Colfax's cost of sales edged up 0.1% year over year, representing 67.5% of total revenue as against 69.5% in the year-ago quarter. Gross margin improved by 200 basis points year over year to 32.5%. Selling, general and administrative (SG&A) expenses, as a percentage of revenue, stood at 21.1%, against 18.8% recorded in the year-ago quarter.

Adjusted operating income grew 9.9% year over year to $136.7 million, while margin came in at 11.3% versus 10.6% in the year-ago comparable quarter.

Balance Sheet and Cash Flow

Exiting fourth-quarter 2014, Colfax's cash and cash equivalents were $305.4 million, up compared with $286.6 million at the end of the preceding quarter. Long-term debt decreased 4.9% sequentially to $1,529.4 million.

In 2014, Colfax generated cash of $385.8 million from its operating activities versus $362.2 million in the previous year. Capital spending increased 13.8% year over year to $81.3 million.

Outlook: For 2015, Colfax lowered its sales guidance to a range of $4.250−$4.4 billion from the prior projection of $4.525−$4.675 billion.

Adjusted earnings are estimated within $2.03−$2.23 per share, down from $2.20−$2.40 forecasted previously. The reduced guidance takes into account the adverse impacts of foreign currency translations.

Generally Accepted Accounting Principles ("GAAP") earnings per share are expected in the range of $1.75−$1.95 versus the prior prediction of $1.92−$2.13.

Tax rate is projected within 28−30%, while interest expense is expected to be nearly $52 million.

With a market capitalization of $6 billion, Colfax currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include II-VI Incorporated ( IIVI ), Kadant Inc. ( KAI ) and The Middleby Corporation ( MIDD ). While II-VI Incorporated sports a Zacks Rank #1 (Strong Buy), both Kadant and Middleby Corporation 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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