Mettler-Toledo International, Inc.MTD delivered fourth-quarter 2018 adjusted earnings of $6.85 per share, beating the Zacks Consensus Estimate by 11 cents and also came ahead of management's guided range of $6.72-$6.77 per share. The figure increased 15% on a year-over-year basis and 33.8% sequentially.
Net sales of $817.92 million were up 5.1% year over year and advanced 11.3% from the previous quarter. In local currency, sales grew 8% from the year-ago quarter, exceeding management's expectation of 6% growth. Further, the figure surpassed the Zacks Consensus Estimate of $807.37 million.
The robust performance of Laboratory and Industrial product lines drove the top line. Further, the company's solid momentum in China spurred growth.
Coming to the price performance, shares of Mettler-Toledo have returned 7.9% over a year, underperforming the industry 's rally of 10.6%.
Nevertheless, the company remains confident on its growth strategies that include productivity and margin initiatives. Moreover, Mettler-Toledo's continued investments in product portfolio expansion, field force, Spinnaker sales and marketing programs are expected to continue benefiting its business growth.
Top Line in Detail
By Segments: The company reports in three segments - Laboratory Instruments, Industrial Instruments and Food Retail Weighing Solutions.
Laboratory Segment: This segment accounted for 52% of net sales in the reported quarter. The company witnessed 7% sales growth on a year-over-year basis. This can be attributed to robust product offerings which include LabX and One Click product. Moreover, acquisition of Biotix continued to benefit the segment.
Industrial Segment: The company generated 42% of net sales from this segment. Further, sales exhibited year-over-year growth of 10%. This can primarily be attributed to well performing product inspection and core industrial businesses, which exhibited growth of 7% and 13% on a year-over-year basis, respectively.
Food Retail: Mettler-Toledo generated 6% of sales from the food retail business. However, the sales declined 6% from the prior-year quarter in this segment. This was due to nature of the project and customer activity timings.
By Geography: The company reports total sales figure from Americas, Europe and Asia/Rest of the World.
Americas: Mettler-Toledo generated 37% of sales from this region, up 7% year over year. This was driven by robust performance of core industrial and Laboratory businesses of the company.
Europe: This region contributed 32% to the net sales of the company in the reported quarter. Sales in this region grew 6% year over year which can be attributed to strong performance of core industrial and product inspection businesses. Further, robust Laboratory product lines contributed well.
Asia/Rest of the World: The company generated 31% of sales from this region, reflecting growth of 10% on a year-over-year basis. This was primarily driven by strong performance of the company in China, where sales grew 12% from the year-ago quarter. Further, strong Laboratory and Industrial product lines drove sales.
Mettler-Toledo International, Inc. Price, Consensus and EPS Surprise
Gross margin was 58.4%, contracting 20 basis points (bps) year over year. This was primarily due to tariff mix, and costs related to new product introduction and product inspection business.
Research & development (R&D) expenses were $36.2 million, up 12% from the year-ago quarter. Selling, general & administrative (SG&A) expenses decreased 2.4% year over year to $201.6 million.
Adjusted operating margin was 29.3%, expanding 140 bps from the prior-year quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2018, the company's cash and cash equivalents balance was $178.1 million, up from $137.4 million as of Sep 30, 2018.
Long-term debt was $985.02 million, decreasing from $988.9 millionin the previous quarter.
Mettler-Toledo generated $198.6 million of cash from operating activities, up from $149.7million in the prior quarter. Free cash flow was $157.2 million compared with $121.3 million in the third quarter.
For first-quarter 2019, Mettler-Toledo expects sales growth of 5.5% in local currency. The Zacks Consensus Estimate for sales is pegged at $676.62 million.
Adjusted earnings are anticipated in the range of $4-$4.05 per share, reflecting year-over-year growth of 7-8%. The Zacks Consensus Estimate for earnings is pegged at $3.98 per share.
For 2019, the company expects sales to grow 5% in local currency. The Zacks Consensus Estimate is pegged at $3.03 billion.
Adjusted earnings are expected to be in the range of $22.5-$22.7 per share. The Zacks Consensus Estimate is pegged at $22.49 per share.
Zacks Rank and Stocks to Consider
Mettler-Toledo carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are TripAdvisor TRIP , Upland Software UPLD and Wayfair W . While TripAdvisor sports a Zacks Rank #1 (Strong Buy), Upland Software and Wayfair carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Long-term earnings growth rate for TripAdvisor, Upland Software and Wayfair is currently pegged at 14.05%, 20% and 18%, respectively.
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