Ametek Inc. (AME) reported third-quarter 2013 earnings per share of 52 cents, in line with the Zacks Consensus Estimate.
The company reported revenues of $890.0 million, up 1.3% sequentially and 6.0% year over year. The increase was due to strong demand in the Electronic as well as Electromechanical segments.
During the quarter, orders grew 4.7% sequentially and 17% from the year-ago quarter to $937.0 million. The book-to-bill ratio improved to 1.05 from 1.02 in the prior quarter.
Revenues by Business Segments
Electronic Instruments Group (EIG) comprised 56% of Ametek’s sales in the quarter, up 9.3% from the year-ago quarter to $499.8 million. The third quarter was strong due to strength in Aerospace and oil and gas businesses, combined with the contribution from Micro-Poise and Controls Southeast acquisitions.
Ametek’s Electro Mechanical Group (:EMG) segment generated 44% of its sales, up 2.1% from the year-ago quarter to $390.2 million. Management stated that the strong growth in Precision Motion Control business and Floorcare and Specialty Motors business led to the top-line increase.
Reported gross margin for the quarter was 35.7%, up 30 basis points (bps) sequentially and 20 bps year over year. The increase was due to higher volumes.
Operating expenses (selling, general and administrative (SG&A) and Depreciation) of $113.2 million were up 3.2% from $109.7 million in the year-ago quarter. As a percentage of sales, SG&A expenses decreased, while depreciation expenses remained the same. As a result, the reported operating margin of 23.0% expanded 60 bps from the year-ago quarter margin of 22.4%.
Reported net income was $127.9 million or earnings of 52 cents per share compared with $115.4 million or 47 cents in the comparable quarter last year. As there were no special items, adjusted net income was the same as GAAP net income in the quarter.
The company ended the third quarter with cash and cash equivalents balance of $254.9 million, up from $207.6 million in the prior quarter. Trade receivables were $532.1 million, up from $521.5 million in the prior quarter. Long-term debt was $1.1 billion, flat sequentially.
Cash flow from operations was $166.0 million versus $128.0 million in the prior quarter. Free cash flow was $151.0 million versus $117.0 million in the prior quarter.
For the fourth quarter of fiscal 2013, Ametek expects total revenue to be up in high single-digits from the year-ago quarter. Earnings per share are expected to be approximately 54 cents, up 10% year over year.
For fiscal 2013, management expects revenues to be up in mid single-digits on a year-over-year basis. Earnings are expected to be approximately $2.09 per share, up 11.0% on a year-over-year basis.
Ametek manufactures and sells electronic instruments and electromechanical devices. The company reported a decent third quarter with both earnings and revenues increasing year over year.
We remain encouraged by the improving order rates in the quarter. Also, the company gave modest fourth-quarter guidance and strong earnings expectations for 2013, reflecting an improving demand environment.
We believe that Ametek’s new products, accretive acquisitions and Global & Market expansion will continue to drive growth. Recently, Ametek acquired 3D measurement technologies and services manufacturer – Creaform, Inc. – for approximately $120 million in an attempt to expand into a high-growth niche market in portable, non-contact metrology applications.
However, we remain concerned about the continued soft economic conditions and believe that the share price will remain range bound in the near term.
Other Stocks to Consider
Currently, Ametek has a Zacks Rank #3 (Hold). Other stocks that have been performing well and are worth a look include Melco Crown Entertainment Limited (MPEL), Kemper Corporation (KMPR) and Fiserv, Inc. (FISV). All these stocks carry a Zacks Rank #1 (Strong Buy).