IDEX's 2Q Below Estimate

Zacks

IDEX Corporation (IEX) has posted adjusted diluted earnings per share (excluding the effect of the restructuring charge) of 67 cents in the second quarter of 2012 compared to 62 cents in the second quarter of 2011 and 66 cents in the earlier quarter. 

The earnings in the reported quarter missed the Zacks Consensus Estimate of 71 cents per share and the company’s previously provided guidance range of 70 to 72 cents per share for the quarter.

The lower-than expected results were primarily due to a weak macro-economic condition in Europe. The foreign currency translation and acquisition charges also adversely affected the performance of the second quarter.

Revenues

Net revenues came to $494.1 million, up 8.9% year over year and approximately 1% sequentially. This was below the Zacks Consensus Estimate of $503 million. Orders were up 4% annually to reach $466 million in the second quarter of 2012. The moderated orders were due to the uncertain economic situation prevailing in Europe and China.

The Fluid and Metering Technologies (:FMT) segment reported sales of $210.7 million, up 0.8% year over year but down 0.9% sequentially. The Health and Science Technologies (HST) segment revenues came in at $170.6 million, surging 21.4% annually but declining 1.8% sequentially. The Fire and Safety segment recorded sales of $115.9 million, rising 10.2% annually and 11.4% sequentially.

Margins

Operating margin (excluding re-structuring charges) in the quarter came to 18.5% versus 18.2% in the previous year quarter and 18.3% in the last quarter. This was achieved on the back of augmented volume and high productivity. The company’s better operational efficiency also caused the margin to improve in the reported quarter. 

The FMT segment reported operating margin of 22.1%, rising from 19.9% in the last year quarter but down from 22.2% sequentially. The segment’s margin was highly influenced by the company’s enhanced production.

The HST segment’s operating margin came in at 16.6%, falling from 21.3% in the previous year quarter and 18.3% in the second quarter of 2012. The decline was primarily attributed to the adverse dilutive effects of acquisition activities.

The Fire and Safety products segment recorded an operating margin of 23.4% versus 25.5% in the year-ago quarter and 23.3% in the last quarter. The annual fall was primarily due to the $2.8 million gain on the sale of its unit in 2011.

Balance Sheet and Cash Flow

As of June 30, 2012, the company had cash and cash equivalents of $221.1 million, decreasing from $245.5 million at the end of the previous quarter. In addition, net receivables came in at $265.2 million, down from $270.8 million at the end of the previous quarter. Long-term debt came down to $753.7 million from $769.9 million at the end of the previous quarter.

Cash provided by operating activities amounted to $80.7 million in the second quarter of 2012 compared to $51.7 million in the previous year quarter. Capital expenditures incurred were $10.2 million versus $7.2 million in the second quarter of 2011.

Share Repurchase

IDEX Corporation has repurchased 626 thousand shares worth $25.9 million during the reported quarter. In the first-half of 2012 the company paid $118 million via share repurchases, cash dividends and debt repayment.

Acquisition

During the second quarter the company acquired gas liquid separation solutions and detection solutions manufacturer ERC from MH Capital Partners II, L.P. (“MH Capital”). The acquisition was completed at a cash consideration of nearly ¥1.65 billion.

Of late, IDEX Corporation also declared the acquisition of Matcon, Ltd. Post acquisition, Matcon will be considered as a subsidiary of the company’s Health & Science Technologies segment’s Material Process Technologies portal.

Outlook

For the third quarter of 2012, the company estimates EPS in the range of 62 to 64 cents per share.

For 2012, IDEX Corporation reduced its EPS expectations to a range of $2.65 - $2.70 from a range of $2.74 - $2.82 based on its moderated financial results reported in the second quarter as well as the softness in global economic situation.

Read the Full Research Report on IEX

Zacks Investment Research



More From Zacks.com
View Comments