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IDEX (IEX) Q3 Earnings and Sales Surpass Estimates, Fall Y/Y

IDEX Corporation IEX reported better-than-expected results for the third quarter of 2020, with earnings exceeding estimates by 16.7%. This was the third consecutive quarter of impressive bottom-line results. Also, the quarter’s sales beat the Zacks Consensus Estimate by 3.1%.

The company’s adjusted earnings in the reported quarter were $1.40 per share, surpassing the consensus estimate of $1.20. However, the bottom line declined 7.9% from the year-ago figure of $1.52 due to weak sales generation and a fall in margins.

Revenue Details

In the quarter under review, IDEX’s net sales were $581.1 million, reflecting a year-over-year decline of 6.9%. The results suffered from a 12% decline in organic sales, partially offset by a 4% gain from acquired assets and a 1% contribution from foreign currency translation.

However, the company’s revenues surpassed the Zacks Consensus Estimate of $563.5 million.

Orders in the quarter totaled $570.3 million, reflecting a year-over-year decline of 3%. Organically, orders fell 5%, while acquired assets and foreign currency translation positively impacted orders by 1% each.

It currently reports under three business segments, results of which are discussed below:

Revenues from Fluid & Metering Technologies totaled $220.8 million, declining 8.4% year over year. Organic sales were down 17%, while acquisitions and foreign currency translation added 8% and 1%, respectively.

Revenues from Health & Science Technologies totaled $220.4 million, reflecting a year-over-year decline of 4%. Organic sales in the quarter decreased 6% year over year, partially offset by a 1% gain from acquired assets and a 1% contribution from foreign currency translation.

Revenues from Fire & Safety/Diversified Products totaled $140.9 million, declining 8.8% year over year. The results were adversely impacted by a 10% decline in organic sales, partially offset by a 1% gain from foreign currency translation.

Margin Profile

In the quarter under review, IDEX’s cost of sales declined 3.7% year over year to $329.6 million. Adjusted gross profit was $251.5 million, down 11.9% year over year, while adjusted gross margin decreased 240 basis points (bps) to 43.3%. The gross margin suffered from unfavorable impacts of unfavorable business mix and lower volumes, partially offset by pricing.

Selling, general and administrative expenses decreased 8.5% year over year to $117.4 million. It represented 20.2% of revenues. Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter under review declined 14.6% year over year to $134.1 million. Also, adjusted EBITDA margin decreased 210 bps year over year to 23.1%.

Adjusted operating income was at $156.2 million, down 10.9% year over year, while margin was at 26.9%, down 120 bps. Interest expenses in the quarter declined 6.1% year over year to $10.6 million.

Balance Sheet and Cash Flow

Exiting the third quarter, IDEX’s cash and cash equivalents increased 17.6% sequentially to $877.8 million. Further, long-term debt at $1,044.1 million was roughly flat on a sequential basis.

Notably, the company used $300 million for the redemption of 4.5% senior notes, while it raised $499.1 million proceeds from the issuance of 3.0% senior notes in the first nine months of 2020.

IDEX generated net cash of $407.9 million from operating activities in the first nine months of 2020, increasing 8.2% from the year-ago comparable period. Capital used for purchasing property, plant and equipment was $39.4 million, reflecting year-over-year growth of 7.2%. Free cash flow was $368.5 million, down 8.3% year over year.

The company paid out dividends totaling $114.2 million and repurchased shares worth $110.3 million in the first nine months of 2020, reflecting a year-over-year increase of 4.6% and 101.8%, respectively.

Outlook

For the fourth quarter of 2020, IDEX expects a sequential improvement in organic sales, while still predict a decline of 3-5% on a year-over-year basis.

IDEX Corporation Price, Consensus and EPS Surprise

 

IDEX Corporation Price, Consensus and EPS Surprise

IDEX Corporation price-consensus-eps-surprise-chart | IDEX Corporation Quote

Zacks Rank & Other Stock to Consider

With a market capitalization of $14.4 billion, the company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the industry are EnPro Industries, Inc. NPO, Kaman Corporation KAMN and Flowserve Corporation FLS. While both EnPro Industries and Kaman currently sport a Zacks Rank #1 (Strong Buy), Flowserve carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for both Kaman and Flowserve improved for the current year, while remained stable for EnPro. Further, earnings surprise for the last reported quarter was 980% for EnPro Industries, 82.76% for Flowserve and 71.43% for Kaman.

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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.

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